//AUDITCHAIN – Decentralized Continuous Audit & Reporting Protocol Ecosystem – Problem

AUDITCHAIN – Decentralized Continuous Audit & Reporting Protocol Ecosystem – Problem

In order for an audit conclusion to be reached by the auditor and for a final comprehensive audit report to be issued, management of the enterprise must first perform its own evaluation of internal controls over financial reporting based on standards set by the Committee of Sponsoring Organizations of the Treadway Commission. Management must represent, not prove, that reporting controls are sufficient and effective and that such an evaluation was performed. Management also needs to share their assessment with the auditor which must include a list of all material weaknesses and deficiencies identified in the assessment. The written conclusion of a typical comprehensive audit provides a statement by the auditor which includes opinions on evidence of fair representations, not1 statements of accuracy. For example; the following statement concludes the report of independent registered public accounting firm PwC dated February 22, 2017 which is included as page 64 in the annual report of Exxon Mobil Corporation for the period ending December 31, 2016; “Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate”.(3) This is an ominous warning and illustrates the potential deficiencies of both internal audit process and independent audit process. There are clearly no assurances that material misstatements will be detected by the enterprise nor is there an assurance that they will be detected by the auditor. Our coverage of these subjects illustrates the highly subjective and conditional disposition of conventional accounting, audit, reporting and disclosure standards.Financial markets rely heavily on the expertise of the human performance of these independent review and audit processes in order to establish trust that the results of such work will disclose, in a timely manner, an accurate representation of financial assets. Furthermore, the Securities Act of 1934(9) as well as most international securities laws require the review, audit and disclosure of the operational and financial condition of such assets.Regulatory framework only requires the enterprise or asset to provide full and fair disclosure and take reasonable steps to assure the detection and prevention of error and fraud. As evidenced by countless instances of fraud and the restatement of filings by publicly traded enterprises, no existing accounting, audit or regulatory system mechanically perfects the detection and prevention of error and/or fraud in a trustless manner.https://auditchain.com/

In order for an audit conclusion to be reached by the auditor and for a final comprehensive audit report to be issued, management of the enterprise must first perform its own evaluation of internal controls over financial reporting based on standards set by the Committee of Sponsoring Organizations of the Treadway Commission. Management must represent, not prove, that reporting controls are sufficient and effective and that such an evaluation was performed. Management also needs to share their assessment with the auditor which must include a list of all material weaknesses and deficiencies identified in the assessment. The written conclusion of a typical comprehensive audit provides a statement by the auditor which includes opinions on evidence of fair representations, not1 statements of accuracy. For example; the following statement concludes the report of independent registered public accounting firm PwC dated February 22, 2017 which is included as page 64 in the annual report of Exxon Mobil Corporation for the period ending December 31, 2016; “Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate”.(3) This is an ominous warning and illustrates the potential deficiencies of both internal audit process and independent audit process. There are clearly no assurances that material misstatements will be detected by the enterprise nor is there an assurance that they will be detected by the auditor. Our coverage of these subjects illustrates the highly subjective and conditional disposition of conventional accounting, audit, reporting and disclosure standards.

Financial markets rely heavily on the expertise of the human performance of these independent review and audit processes in order to establish trust that the results of such work will disclose, in a timely manner, an accurate representation of financial assets. Furthermore, the Securities Act of 1934(9) as well as most international securities laws require the review, audit and disclosure of the operational and financial condition of such assets.

Regulatory framework only requires the enterprise or asset to provide full and fair disclosure and take reasonable steps to assure the detection and prevention of error and fraud. As evidenced by countless instances of fraud and the restatement of filings by publicly traded enterprises, no existing accounting, audit or regulatory system mechanically perfects the detection and prevention of error and/or fraud in a trustless manner.

https://auditchain.com/