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Journey of the Big Four: Audit Giants Bet on Cryptocurrency and Blockchain (Part Three)

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Possible Consequences for the Acquisition of Level 3 Communications by CenturyLink

Introduction

Globally, we are witnessing that companies, researchers, governments, and even individuals are exploring the Bitcoin (cryptocurrency) and Blockchain technology to ascertain how it can be leveraged across various industries. The Big Four accounting firms also joined this trend pretty early on; to be better prepared to inculcate the technology in their offerings in the near future. The top two biggest verticals that will be revolutionized by these technologies are finance and healthcare. We expect the Big Four to target the financial services industry which contributes a good chunk to their revenues.

Currently, we know these technologies are still in the exploratory stages and the finance industry has started investing in it; however, their internal staff is still hardly equipped to even understand the scope of Bitcoin and Blockchain technology. This is where these accounting firms lend a helping hand in the form of consulting and also have their various ongoing initiatives surrounding these technologies to back their credibility. For instance, banks and equity firms need to be prepared to adopt these technologies in future since once implemented, it will make the current systems obsolete. Blockchain also helps in maintaining records of transfer of securities. Amongst various other things, the tax implications of Blockchain are not yet identified and the Big Four can also use this opportunity to expand their tax services offerings.

Interestingly, accounting jobs will be at risk if and when Blockchain automates the audit process and the Big Four embracing this challenge by investing in the Blockchain technology shows their proactive approach.

Also, throughout their journey of expansion and embracing innovation, acquisitions & mergers, and alliances have immensely supported the Big Four in their growth plans. Deloitte’s Blockchain partnerships include ConsenSys Enterprise, BlockCypher, and Stellar. PwC formed partnerships with Blockstream, Eris, Digital asset holdings, and BitSE. EY created alliances with start-ups like JAAK, Bitfury, and Paxos. KPMG has one of the largest partnerships with Microsoft.

Let us look at the timeline of each of the Big Four with respect to adoption of Bitcoin and Blockchain:

Deloitte:

  • In July 2015, Deloitte launched a Blockchain software platform, Rubix.
  • In May 2016, Deloitte announced plans to open financial services Blockchain lab in Dublin (Ireland).
  • In September 2016, Deloitte installed an ATM that dispenses Bitcoin at its downtown office in Toronto (Ontario, Canada). Bitcoin is also accepted as payment at its internal restaurant, called Bistro 1858.
  • In May 2017, Deloitte joined the Ethereum Enterprise Alliance (EEA) and the Hyperledger Project by the Linux Foundation.
  • In July 2017, Deloitte CIS (Commonwealth of Independent States) partnered with Waves Platform for providing comprehensive initial coin offering (ICO) services and customized Blockchain solutions.

Ernst & Young (E&Y):

  • In October 2016, E&Y initiated a start-up challenge to explore Blockchain solutions for two industries namely, digital identity and energy trading.
  • In November 2016, E&Y announced that from 2017, EY Switzerland clients will have the option to settle their invoices for auditing and advisory services using Bitcoin.
  • In May 2017, E&Y joined Bitcoin Association Switzerland as a corporate member.
  • In April 2017, E&Y unveiled a financial services Blockchain lab in New York (US) and launched Ops Chain, a set of applications and services aimed at helping organizations commercialize the use of Blockchain technology. Previously E&Y had established Blockchain labs in London (UK) and Thiruvananthapuram (India).

PricewaterhouseCoopers (PwC):

  • To exploit and commercialize Blockchain, in January 2016, PwC announced that it was recruiting 15 technology specialists to set up a new global technology team. Since then, PwC has collaborated with various enterprises (public and private) to push the applicability of the Blockchain technology globally.
  • In November 2016, PwC launched Vulcan Digital Asset Services in collaboration with Bloq, Libra, and Netki. Vulcan offers investment services, international payment processing, and virtual currency wallets to fintech companies.
  • In March 2017, PwC announced that it was exploring Blockchain solutions with Alibaba and food industry stakeholders to address supply chain fraud and build trust in the food industry.
  • In March 2018, PwC launched its Blockchain auditing service. The service will allow companies to offer an outside review of their use of Blockchain technology, thereby ensuring they are using it properly and enabling employees to monitor the company’s Blockchain transactions.

KPMG:

  • In September 2016, KPMG launched Digital Ledger Services, a suite of services designed to help financial services companies implement Blockchain technology. The Blockchain initiative by KPMG was supported by Microsoft’s Blockchain as a Service (BaaS) platform. Building on their strategic partnership, KPMG and Microsoft (MSFT) launched joint Blockchain Nodes in early 2017. These were designed to create and demonstrate use-cases that apply Blockchain technology to business propositions and processes.

Conclusion and Future Outlook:

The Big Four have often been accused of being slow in adopting newer technologies like cloud, analytics etc. Some of the challenges are that accounting firms are highly regulated, they are slow in moving the legacy systems and code into the modern systems, and some of their clients still use archaic data storage methods.

Besides the common concerns which surround new technologies such as data security and privacy, lack of technical specialists, and ambiguity around regulatory and compliance, one more issue is that no audit system is in place for Blockchain. Although Blockchains’ main benefit is that it provides non-biased and accurate information, legal requirements, specifically in the finance industry may not completely trust the Blockchain technology. Authorities would require a system in place that will monitor the Blockchain infrastructure to ensure no errors or technical difficulties hamper the process. Currently, even experts may not be well versed to fulfill such requirements.

Emerging technologies like Blockchain rely on encryption to protect transactions and if the encryption scheme will be broken by using faster processors, Blockchain will also require a greater processing power.

Nevertheless, the potential benefits that Blockchain offers are significant, and hence, investments in it need to be an ongoing activity. A self-auditing and immutable record process saves time and effort for verifying company financials and reducing the difficulty and complexity levels of audits.

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