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Request Network is a decentralized network for payment requests, there are 5 use cases and one of them is about audit & accounting. Here is our yellow paper about this part.

We’re still in the early days of understanding what Blockchain can do, but the long-term potential of the technology is huge. Especially for the finance world, with a significant number of possibilities in the accounting and audit industry. It has the power to revolutionize the way we audit a company today.

The financial audit that we know is far from being an easy job both for the audited company and for the auditor. From the data collection to the multiple reconciliations to an understanding of the accounts it is a long, manual, fallible, and expensive process. Built on the Blockchain, Request Network introduces the concept of smart audit with algorithms that verify transactions in real-time, detect irregularities, consolidate accounts, and raise potential mistakes by providing the algorithm with your verification key.

With Request and the endless applications of the Blockchain, it is our hope that accounting and auditing practices will change.

The system allows a unique and immutable ledger. Thanks to the interoperability and decentralized nature of the Blockchain, multiple parties can read or write on the ledger. An invoice isn’t recorded anymore in two independent accounting systems but in one universal ledger verified by everyone. Imagine the impact of such a system on the management of intercompany transactions of an international group.

We’ll see the emergence of the triple-entry accounting system (with the digital signature, the invoice becomes the transaction) and the time stamping system (basic blockchain function that permanently registers the time that a particular action took place on the block).

With a common ledger, auditing firms can then develop their own algorithms and apply these to audit a company (if the latter agreed to it). This is the concept of smart audit.

It also provides a simultaneous system. With a unique ledger, we can think of the taxes being declared instantly to governments. The government doesn’t need to wait until the end of the year to collect taxes because the system sends the information in real-time as soon as the invoice is validated by every party. Taxes being automatically returned each time an invoice is issued completely changes the way we do our accounting today.

Apart from that, smart audit provides correct and current information about a company’s financial health. While today’s credit analysis is a painful task because of non-transparent and outdated financials (more than a 6-month lag), Request makes all transactions instantly available on a shared database to be audited. The credit score of a company can then be updated regularly. We can elaborate on this and add a reputation system for good and bad payers allowing a company to improve its credit score by paying its invoices on time. This would result in an easier access to investment and financing.

We’re proud to introduce our yellow paper on smart financial audits.

If you want to learn more, come join us on our Slack!