Decentralized Finance (DeFi) Assurance: Early Evidence

Review of Accounting Studies, forthcoming.

59 Pages Posted: 25 May 2023 Last revised: 7 Jun 2024

See all articles by Thomas Bourveau

Thomas Bourveau

Columbia University - Columbia Business School, Accounting, Business Law & Taxation

Janja Brendel

The Chinese University of Hong Kong (CUHK)

Jordan Schoenfeld

Ohio State University (OSU)

Date Written: November 15, 2023

Abstract

Decentralized finance (DeFi) transactions are typically executed using a special digital
class of contracts called smart contracts. These contracts are self-executing and hardcoded
directly on a blockchain. We observe the emergence of a new class of voluntary
audits that evaluate the integrity of these contracts. Using a hand-coded sample of
about 8,500 smart contract audit reports, we provide some of the first evidence showing
that (1) these audits are pervasive, (2) the audit firm market is predominantly
composed of new technical audit firms, (3) the scope of these audits can span a variety
of contract features, (4) the audit inputs and outputs differ substantively from those
of conventional financial audits, and (5) the market reacts positively to the release of
these audit reports, suggesting that these reports are value-relevant. These findings
highlight the demand for novel assurance services driven by blockchain technology.

Keywords: Auditing, Decentralized Finance, Smart Contracts

JEL Classification: G14, G19, G29

Suggested Citation

Bourveau, Thomas and Brendel, Janja and Schoenfeld, Jordan, Decentralized Finance (DeFi) Assurance: Early Evidence (November 15, 2023). Review of Accounting Studies, forthcoming., Available at SSRN: https://ssrn.com/abstract=4457936 or http://dx.doi.org/10.2139/ssrn.4457936

Thomas Bourveau

Columbia University - Columbia Business School, Accounting, Business Law & Taxation ( email )

3022 Broadway
New York, NY 10027
United States

Janja Brendel

The Chinese University of Hong Kong (CUHK) ( email )

Shatin, N.T.
Hong Kong
Hong Kong

Jordan Schoenfeld (Contact Author)

Ohio State University (OSU) ( email )

Blankenship Hall-2010
901 Woody Hayes Drive
Columbus, OH OH 43210
United States

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