Digital Financial Reporting

Auditchain announced that they will use NFTs for accounting and disclosure controls. What exactly does that mean?  Well, here is financial accounting and reporting knowledge that I put into machine-readable form using the global standard XBRL.  This Microsoft 10-K financial report plus the rules that I added is an example of using those machine-readable rule to verify that a financial report is properly functioning.

A problem with the information on the internet is that there is no real quality control.  That is true even with information provided on government web sites such as the Securities and Exchange Commission (SEC) EDGAR system.  Look at the errors that I found in the XBRL-based financial reports submitted to the SEC.  I am not the only one that finds issues with those reports.

And it is not just the XBRL-based financial reports that are submitted to the SEC that have issues.  XBRL-based financial reports submitted to the ESMA have similar issues.

There is a bit of a "chicken or the egg" type of problem.  Those XBRL-based financial reports simply cannot be of high quality unless the proper rules are provided to verify and prover the information is of high quality. It is the rules that provide the control necessary to guarantee the quality level necessary. But creating the rules is time consuming.  This is kind of like Wikipedia; excellent free resource, but who creates it?

In that article, it says:

"Non-fungible tokens representing the controls are issued to the curators, and royalties are allocated between curators and validators who audit and provide assurance that the machine-readable logic works correctly. Royalties will be allocated in AUDT, the settlement and Auditchain Protocol governance token."

Here is the Auditchain roadmap.

So here are some NFT basics. I am trying to figure out how staking works.  I see this as an excellent business model that is not based on billing by the hour.

Before you write this of in your mind, I would recommend that you read New Rules for the New Economy.

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Auditchain REVIEW (Video)

This video, Internet Knowledge, featuring James Burke, is very appropriate given what is going on today.

A fundamental premise that I seem to see is the following:  In any decision, you are constrained by your knowledge at the time you make that decision (e.g. thinking inside the box).  The problem is that the view from "inside the box" does not necessarily always play out.

According to Burke, the pace of change is not even in first gear yet.  From the perspective of "inside the box" it looks like the pace of change is rapid. But change is just getting started. We are in a period of transformational confusion.

Burke points out, "If institutions stand too long in the jungle; something will eat you." This will apply to the institution of accountancy.

I pointed out what a knowledge graph is, that XBRL is a standard formal syntax for representing a knowledge graph, and that a financial report is a knowledge graph.

GRAILOG is a standard model for representing logic within a knowledge graph. Grailog was developed by Harold Boley.  For more information see this presentation.