International Journal of Emerging Research in Engineering, Science, and Management
Vol. 3, Issue 4, pp. 62-65, Oct-Dec 2024.
https://doi.org/10.58482/ijeresm.v3i4.9

A Comprehensive Study on Blockchain Technology and its Prospects to Create an Effective Internal Control System

*Saji Vithal Vernekar

#Aman Gupta

#Ganesh Chavan

*Research Scholar, Shri Jagdishprasad Jhabarmal Tibrewala University, Rajasthan, India.

#Associate Professor, Shri Jagdishprasad Jhabarmal Tibrewala University, Rajasthan, India.

Abstract: This paper explores the revolutionary impact of blockchain technology on internal control systems in organizations. In today’s interconnected and rapidly changing corporate landscape, businesses must establish efficient administrative control systems to mitigate risks and meet legal obligations. Blockchain technology, with its decentralized record-keeping and cryptographic security features, addresses many contemporary issues related to transparency, security, and efficiency. This study delves into how blockchain affects internal control frameworks by ensuring immutable transaction trails, improving traceability, and enhancing security, all while automating processes through smart contracts. Additionally, challenges such as scalability, interoperability, and regulatory compliance are discussed. The conclusion emphasizes that while blockchain is not a replacement for internal control systems, it acts as a powerful complement, strengthening overall system efficiency and effectiveness.

Keywords: Blockchain Technology, Business Organizations, Internal Control, Risk Management, Security.

References:

  1. Talakayala, P. Dahiwale, and S. Mate, “General voting system for democratic countries using blockchain and computer technology,” International Journal of Emerging Research in Engineering Science and Management, vol. 2, no. 1, Jan. 2023, doi: 10.58482/ijeresm.v2i1.3.
  2. K. Tysiac, “Evaluating blockchain and internal control through a COSO lens,” Journal of Accountancy, Aug. 04, 2020. [Online]. Available: https://www.journalofaccountancy.com/news/2020/aug/evaluating-blockchain-and-internal-control-coso.html
  3. Dong and H. Pan, “Enterprise audits and blockchain technology,” SAGE Open, vol. 13, no. 4, Oct. 2023, doi: 10.1177/21582440231218839.
  4. Han, R. K. Shiwakoti, R. Jarvis, C. Mordi, and D. Botchie, “Accounting and auditing with blockchain technology and artificial Intelligence: A literature review,” International Journal of Accounting Information Systems, vol. 48, p. 100598, Nov. 2022, doi: 10.1016/j.accinf.2022.100598.
  5. Elommal and R. Manita, “How Blockchain Innovation could affect the Audit Profession: A Qualitative Study,” Journal of Innovation Economics & Management, vol. N° 37, no. 1, pp. 37–63, Jun. 2021, doi: 10.3917/jie.pr1.0103.
  6. Kazan and T. U. Kocamış, “Assessing the impact of blockchain technology on internal controls within the COSO framework,” Journal of Corporate Governance Insurance and Risk Management, vol. 10, no. 1, pp. 86–95, Jun. 2023, doi: 10.56578/jcgirm100110.
  7. Ma and W. Li, “Blockchain technology and internal control effectiveness,” Finance Research Letters, vol. 64, p. 105442, Apr. 2024, doi: 10.1016/j.frl.2024.105442.
  8. Doyle, W. Ge, and S. McVay, “Determinants of weaknesses in internal control over financial reporting,” Journal of Accounting and Economics, vol. 44, no. 1–2, pp. 193–223, Jan. 2007, doi: 10.1016/j.jacceco.2006.10.003.
  9. Huang, J. Guo, T. Ma, and Y. Zhang, “Does the value of cash holdings deteriorate or improve with material weaknesses in internal control over financial reporting?,” Journal of Banking & Finance, vol. 54, pp. 30–45, Jan. 2015, doi: 10.1016/j.jbankfin.2015.01.007.
  10. Jacoby, Y. Li, T. Li, and S. X. Zheng, “Internal control weakness, investment and firm valuation,” Finance Research Letters, vol. 25, pp. 165–171, Nov. 2017, doi: 10.1016/j.frl.2017.10.018.
  11. E. Boritz, L. Hayes, and J.-H. Lim, “A content analysis of auditors’ reports on IT internal control weaknesses: The comparative advantages of an automated approach to control weakness identification,” International Journal of Accounting Information Systems, vol. 14, no. 2, pp. 138–163, Jan. 2012, doi: 10.1016/j.accinf.2011.11.002.
  12. E. Vincent, A. Skjellum, and S. Medury, “Blockchain architecture: A design that helps CPA firms leverage the technology,” International Journal of Accounting Information Systems, vol. 38, p. 100466, Jul. 2020, doi: 10.1016/j.accinf.2020.100466.