Introduction

This is a Continuously Expanding Information Repository Covering the Building Blocks of the Auditchain Protocol: a Decentralized Accounting, Financial Reporting, Audit and Analysis Infrastructure.

Overview

Auditchain is developing the world's first web3 enabled financial disclosure automation and artificial intelligence based assurance protocol infrastructure that provides proof of financial and operational state of economic entities.

The project is designed to achieve three main overarching objectives: (i) providing an alternative means of external assurance to stakeholders, (ii) motivating and incentivizing the institution of accountancy to contribute to the infrastructure, and (iii) moving global regulatory disclosure frameworks from periodic to real time reporting and disclosure under continuous assurance that is suitable for issuers of digital assets and today's open ledger based investment society.

So how do we do this? Through incentives for creators of accounting, reporting, audit and analysis controls and validators who audit and prove that the controls work correctly. As the network populates with more and more controls, accounting, audit, financial reporting and analysis become more automated.

This becomes the basis of a completely automated virtual machine for financial reporting, audit and analysis and is in the process of becoming a global standard.

So why does the institution of accountancy need a virtual machine, you ask? To make capital markets safer and so the accountants can get a life instead of performing manual tasks. They can annuitize their income stream instead of charging by the hour. They create financial reporting, audit and analysis Process Control NFTs and get paid royalties every time they are used. The validator who audits the control also gets paid a royalty each time they are used. Anyone can create a Process Control NFT. You don't have to be an accountant but you MUST understand accounting, reporting, audit or analysis logic.

A virtual machine is also needed for the same reason Ethereum needs a virtual machine: to define the rules for computing a new valid state. The difference between Ethereum and Auditchain is that Auditchain is a layer 2 protocol that uses computers running its Pacioli AI Logic and Reasoning Engine to define and validate machine readable proof of financial and operational state.

Since each economic entity is unique, the data and logic sets are diverse and complex and therefore require constraints to model, compute and validate its financial state. Internal controls and the presentation of the financial state of an economic entity is a cryptographically reinforced logical system and the logical system is machine readable. Machine readability is a key to bi-directional declarative logic and data interchange.

In the European Union, machine readable, as well as human readable data and logic is now within the scope of an audit engagement. Soon, machine readable data and logic will be within audit scope in other parts of the world. Since auditors of financial statements rely on an economic entity's controls over financial reporting to help them gain confidence in the data, it has become critical that those controls be audited under a special engagement: ISAE 3402. On the Auditchain Protocol, the NFTs are issued to curators following the validation of each control by a plurality of auditors under the standards of ISAE 3402.

As the world's accountants and professionals earn royalties by contributing more and more Process Control NFTs to the library, processes become more refined and financial state articulation becomes more and more precise. The more precise the logical system is, the more reliable financial state models become. The more reliable they become, the more they can be used to predict and estimate future outcomes on a micro and macroeconomic level.

Sounds cool right? Its gets better. Instead of working for years accumulating capital in the capital accounts of professional services firms, accountants, professionals and enterprises can now build a portfolio of Process Control NFTs that earn revenue every year.

Ok NOW accounting and professional services just became the sexiest profession on the planet!

Accounting, audit and financial reporting are complicated subject matters and are sometimes difficult to articulate. They are even more difficult from a technical implementation perspective. We are working really hard to make the profession sexy. Wherever and whenever we can, we will attempt speak plain English when discussing these matters and we will refer to our GitHub when describing technical functionality of the protocol where appropriate.

We also hope to add a sense of humor as well as a sense of humanity. Please be sure to join our Discord server. We will stage periodic live discussions on the project and also the usual crypto banter.