The Adoption of Blockchain Technology on Company’s Internal Control System in Sales and Purchasing Cycle

ABSTRACT This paper explores the use of blockchain technology to enhance internal control systems for fraud prevention within the sales and purchasing cycle. Despite existing internal controls, significant weaknesses persist in these systems, leading to issues such as poor performance, missing orders, underpricing, rebates, false charges, falsification of order information, late delivery, and order/performance shifting. Using the design science research approach (Hevner, March, Park, and Ram 2004), we propose a conceptual framework that allocates the verification, storage, and management of events to each authorized blockchain node, preventing tampering with verified data. By integrating blockchain’s secure, traceable, and decentralized features with smart contracts, oracles, and the Internet of Things (IoT), our framework aims to automate workflows, track goods in real-time, and measure operational performance accurately. This approach enhances internal control systems, reduces audit workloads, and mitigates the risk of business fraud and misconduct. JEL Classifications: M42; M49.