Augmenting Audit and Control: a Blockchain Based Control Framework (BBCF)

Abstract

Audit and control have become key elements of sound corporate governance. While the Three Lines Model (TLM) provides an organizational structure to execute risk and control duties, research and practice show that this model also has limits even when integrated within proper Enterprise Risk Management (ERM) and Internal Control (IC) frameworks. Such control weaknesses could be addressed by leveraging properties of distribution, transparency, and immutability of blockchain technology. To this end, this paper proposes a conceptual control framework based on blockchain technology to augment common control practice with more trustworthy and accountable blockchain based control patterns. The design of the resulting Blockchain Based Control Framework (BBCF) and its prototype are presented and discussed in terms of potential impact in the context of the identified limits and in particular with respect to COSO, the TLM and risks in general. The contribution intends to serve both as a starting point for discussing the evolution of audit and control practice based on blockchain technology, as well as an initial actionable prototype for experimentation and further development.