This is a Continuously Expanding Information Repository Covering the Building Blocks of the Auditchain Protocol: a Decentralized Accounting, Financial Reporting, Audit and Analysis Virtual Machine.
Auditchain is developing the world's first decentralized accounting, financial reporting, audit and analysis virtual machine that automates and provides proof of assurance on the world's business and financial information.
The project is designed to achieve two main overarching objectives: (i) motivating and incentivizing the institution of accountancy to contribute to the virtual machine, and (ii) transforming global regulatory disclosure frameworks from periodic information embargoes to real time reporting and disclosure under continuous assurance and attestation suitable for Web3 open ledger based finance and commerce.
So how do we do this? We propose "perfecting" the allocation of royalties between creators of accounting, reporting, audit and analysis logic and validators who audit and prove that the logic works. As the network populates with more and more logical rules, accounting, audit, financial reporting and analysis become more automated. This becomes the basis of a completely automated virtual machine for accounting, audit, financial reporting and analysis.
So why does the institution of accountancy need a virtual machine, you ask? 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 accounting, financial reporting, audit and analysis Process Control NFTs and get paid AUDT every time they are used. The validator who audits the control also gets paid AUDT 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 client; which we lovingly call Pacioli, to define machine readable declarative logical rules, as opposed to imperative logic, to compute and validate a valid financial state for each economic entity based on the reporting style and reporting scheme of each economic entity.
Since each economic entity is unique, the data and logic sets are diverse and complex and therefore require the declarative constraints to compute and validate its financial state. The presentation of the financial state of an economic entity is a 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 more AUDT by contributing more and more Process Control NFTs to the library, processes become more refined and the financial report outputs become more and more precise. The more precise the logical system is, the more reliable they 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 they can sell one day. 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.