Legal Aspects of Blockchain Technology: Audits

Preamble

This article is the fourth publication of the series “legal aspects of blockchain technology” by the Frankfurt School Blockchain Center (FSBC), Datarella, and CMS Hasche Sigle. This research is part of the KOSMoS project, a research project funded by the German Federal Ministry of Education and Research (BMBF) under the funding code 02P17D020. The Frankfurt School Blockchain Center gGmbH and Datarella GmbH are part of the “KOSMoS” consortium. Together with partners from the industry (Schwäbische Werkzeugmaschinen GmbH, Alfred H. Schütte GmbH & Co. KG, ASYS Automatisierungssysteme GmbH), academia (Universität Stuttgart, Hochschule Furtwangen), and software development (inovex GmbH, Ondics GmbH), they create a blockchain-based solution allowing manufacturing companies to establish a DLT-based framework for producing machines in order to a) execute dynamic leasing contracts, b) provide transparent maintenance documentation and c)ensure high-quality documentation of manufactured products.

Introduction

Blockchain technology holds immense potential and will be an important building block of the advancing digitization in the future due to its wide range of possible applications. However, as blockchain applications become more and more important in the business world, fundamental questions arise for both consumers and companies regarding issues such as audits, guarantees of functionality, and possible legal claims in the event of non-compliance with said functionality. In order to ensure a legally secure basis for all parties and participants, it is therefore important to clarify any questions of liability, for example in the event of damages. Without absolute certainty in these matters, companies will find it difficult to implement blockchain-based business models. Therefore, in this article, we discuss related issues and draw conclusions based on current German law.

Audit requirements

In principle, there is no formal obligation under German law to test a computer, IT infrastructure or blockchain (hereinafter simply referred to as the “system”) prior to using or to verifying its functionality otherwise. However, there are some exceptions, which will be discussed in the following sections. Furthermore, there can also be an indirect obligation to audit such systems under certain circumstances, which will be analyzed in the second part of this article.

Direct obligation for audits

When an audit is conducted to assess a company, the audit is always an independent examination of its financial information. Regardless of its size or legal form, and regardless of whether the company being audited is a for-profit company or not.[1]

Endnotes

[1] Gupta, Kamal (November 2004). Contemporary Auditing. McGraw Hill. p. 1095.

About KOSMoS

KOSMoS is a research project funded by the German Federal Ministry of Education and Research (BMBF) under the funding code 02P17D020. More information about the project can be found on the website.

Remarks

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Jonas Gross

Jonas Gross

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Jonas Gross is Chairman of the Digital Euro Association (DEA) and Head of Digital Assets and Currencies at etonec. Further, Jonas holds a PhD in Economics.