Block Chain: Create a simple and secure record concept

nnSince the creation of the double-entry bookkeeping method in 1340, the accuracy of the financial reporting system has been the focus of accountants and business owners, and as more and more rely on computerized information systems, the reliability of information is increasingly The more important, and the block-chain database structure is designed to achieve this reliability. This paper discusses the development history of the chain chain infrastructure and highlights the view of the accountant on such a platform, and illustrates the risk of the chain chain from the perspective of accounting and auditing.n
nnTranslation: Clovern
nSince the creation of the double bookkeeping method in 1340, accountants and business owners have been focused on the accuracy of the financial reporting system. The double-entry bookkeeping method prevents false positives and facilitates the reliability of accounting. As more and more dependent on computerized information systems, more reliable information is imperative. The block-chain database structure is designed to achieve this reliability.n
nThe beginning of the efforts to record the preservation of the integrity of the theoretical vision of the effort, has now developed into a highly accurate information quality and availability of distributed database structure. This database structure can help prevent and detect fraudulent transactions by parties to the transaction. The block chain concept is risky, but because of its built-in audit trail, these risks are also controllable. And the implementation of the block chain to the enterprise system is still in its early stages, but it is very likely to be different enterprises, large government agencies and the use of various types of exchanges. Once this technology is mature and widely adopted, the block chain may be “system of systems”, or the main “journal of journals”. Accountants, managers, and educators are able to play a key role in this development opportunity, and should also be familiar with their basic principles: self-verification of a separate database of individual classified books.n
nIn 1991, the demand for electronic security was a major concern for bankers, regulators and service providers. And this concept is developed in order to make online banking, online transactions and e-commerce generated by the public trust financial data into a “distributed classification books”, the concept is based on the assumption that the custody of each class book is independent of Other custodians (Stefan Konst, “Secure Log Files Based on Cryptographically Concatenated Entries”, August 2000, http: // These classifications are often synchronized, and because there is no single-controlled manager, if there is a conflict between the accounts in the classified books, then the accounts of more than half of the custodians become the actual winners. This feature allows all custodians to be honest (to prevent errors and fraud) and to be responsible (to detect errors and fraud). With the emergence of open source computing in the late 1990s, block-chain open source software has been implemented, which enables financial innovations such as virtual currency such as bitcoils.n
nThis paper will discuss the development history of the block chain infrastructure and highlight the accountant’s view of such a platform. From the perspective of accounting and auditing, risk issues are particularly interesting, because the risks posed by virtual currency are still a concern and require risk management.n
nAccounting perspectiven
nThe block chain is similar to the traditional account book and the log account in the record. In the case of log accounts, a single data is called a “block” and can not be deleted or modified, but only reversed. As a result, all changes generate an audit trail, and theoretically, the transaction is safe. The blocks in the block chain, in addition to the required data, can also carry additional audit trails and analyze the data, such as the total number of affected accounts before and after the transaction. These additional data facilitates fraud prevention and efficiency in database design.n
nAt the beginning, block chains exist in multiple “homogeneous” databases that “do not trust each other” with each other; the custodian may not even know who the other is the custodian of the same database. Since information exchange can be done using a standardized public domain name format, such as Extensible Markup Language (XML), there is a higher degree of accuracy between single majority rule coordination of classified books. These classified books will be very helpful on a number of stock exchanges, capital pools, or even the long-awaited public platform mandated by the US Venture Capital Act (JOBS) (Yigal Rechtman and Susanne O ‘ Callaghan, “Understanding the Basics of Crowdfunding”, CPA Journal, November 2014, http: //
nThus, both in theory and in practice, even if a custodian mistakenly records an off-exchange trading platform, it is still possible to ensure the accuracy of the record, since most of the same databases will “vote” to resolve the conflict. Each database is periodically synchronized and uniquely identifies each transaction – and other changes such as total account balance, user information, date / timestamp, and no matter what kind of audit trail may help maintain the entire system The accuracy of the. Accordingly, all releases and changes are periodically synchronized. Figure 1 illustrates this process.n

nfigure 1 n
nBlock chain reconciliation processn
nIn an off-exchange trading platform, the custodian remains the same, but the initiator is the stockbroker or the stock party executing the transaction, as shown in Figure 2. Custodian C will be found to have violated two data elements; most of the rules will conclude that the stock price ($ 3) is not the same as the recorded record, and the number of shares multiplied by the dollar cost is also wrong. In this example, the advantages of the block chain are obvious, since the integrity of the custodian decision and the internal integrity of the block chain can be verified, such as total transaction value (unit x cost).n

nfigure 2 n
nThe detection and coordination of fraudulent accounts in the block chain records of OTC Stock Exchangesn
nBit currency and other virtual currency in its code on the use of the block chain method; because the virtual currency database is to the center of the, so there is no single custodian can control the entire classification of the accounting system at any time. The same kind of database custodian’s anonymity allows them to maintain a high accuracy rate. However, some observers are concerned that the block chain has reached its actual limit. Theoretically, if a single person controls 51% or more of the custodian of a market, it will become the owner of the market and can make effective changes to all the databases at once. In this case, the person can become the controller of the entire financial system. Although this practical limit has not yet been touched, there is no guarantee that this will not happen. There is a theory that if 51% of the actual limit is reached, it is generally possible to start more custodians, thereby weakening the majority of groups; however, such incidents have never been tested. Regulators and researchers are still worried about the “51%” situation (Emily Spaven, “The European Banking Authority: 51% attack is still the biggest problem facing Bitcoin”, July 17, 2015, http: // bit. ly / 2r1lJgX). The price of virtual currency is controlled by factors such as supply and demand. If a person controls a 51% of the virtual currency custodian, it can modify the actual price of the transaction between two anonymous parties (all parties in a block chain transaction) to manipulate the price, resulting in fraudulent benefits Then
nAudit trailn
nThe block chain can also be built with a built-in native audit trail; for example, a record of the dividend pay cycle can be constructed so that different databases maintain blocks that describe the dividend payee and include periodic audit trails (for example, Owner status, stock segmentation terms, stock transaction date stamp, tax report and compliance owner details). While such a data set can be maintained by controlling the entire stake in a listed company, multiple blocks of the same chain will create a more robust audit trail. Even if a block in a database is deleted, the other databases are still able to synchronize themselves, correct the damaged database, and cancel the deletion. This redundancy function can be performed at multiple levels during the equity lifecycle.n
nSome people think that such a redundancy can reduce the business cycle without leaving traces of tampering with the risk of records (“block chain in the insurance industry,” Deloitte, 2016, http: // When extending the block chain for audit trails, the dividend payment system in the above example can facilitate an end-to-end trusted log containing credible books for each person who actually receives the payment. The block chain dividend log can also be associated with tax reports; this type of integration can generate a log system that is fully supported by audit trails. The unique log of various business cycles can be maintained either individually or in a log system. Each system’s classified books are robust, redundant but highly accurate. This redundancy has a single point of account and multiple processing and resolution points, so it can also create efficiency for the parties to the transaction. These efficiencies are seen by some people (especially in the field of virtual money) as an incentive for capital market growth (Paul Vigna, “Delaware Consider Using Block Chain Technology,” The Wall Street Journal, May 2016 1 day, http: //
nOther implementation risksn
nIn addition to the above-mentioned single person to control the risk of the entire system, the block chain there are other risks. First, the risk of misconfiguration in the implementation of abstract, general-purpose redundant databases should not be overlooked. XML is a mature communication and switching technology, Extensible Business Reporting Language (XBRL) and other standard protocols for data exchange. However, because the block chains can be exchanged and synchronized between the untrusted custodians of large databases, the limits of data integrity can be tested. This is a risk of a large amount of evidence; when the user access control configuration is bad, even a well-designed information system may fail. In general, the software is prone to poorly configured situations, especially for users accessing the software (see institutional support for the “access control system assessment” by encouraging C. Hu, David F. Ferraiolo and D. Rick Kuhn, National Institute for Standards in Technology (NIST), September 2006, http: //; “Security and Privacy Control of Federal Information Systems and Organizations,” NIST, January 22, 2015, http: // / 2q5cFTr). Similarly, the block chain system configuration is not yet mature, it is not a no error or no friction process. As a matter of course, the risk of access control, processing, and storage integrity misconfiguration can make managers who use block chains, advise advisors on implementation, and auditors of auditing such systems.n
nThe Way to the Futuren
nThe block-chain database is a promising tool for capital and regulatory markets, but it also poses a risk. Business leaders in large diversified companies will take a good look at the underlying block chain database under their corporate resource planning and accounting information systems (ERP / AIS). In addition to the built-in functionality for prevention and detection of fraud and the benefits of audit trail, the underlying database also brings redundant reporting and data filling efficiency. Larger diversified entities are ideal subjects for adopting and developing this technology, and are able to consume more resources on such systems.n
nAccounting professionals can also play a leading role in the implementation of the proposed block chain system, or audit the accuracy of implementation. Educators and researchers are also working for them; once the new underlying database begins to invest, the researchers will find a number of practical applications that need to be addressed. Educators also need to prepare future managers and accountants to take advantage of the opportunities brought about by the chain-chain database.n
nAlthough this highly accurate log is the same as the double-entry book, the birth of new technology means that the future CPA industry will change dramatically.n

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