Paper 2024/1155

Cross Ledger Transaction Consistency for Financial Auditing

Abstract

Auditing throughout a fiscal year is integral to organizations with transactional activity. Organizations transact with each other and record the details for all their economical activities so that a regulatory committee can verify the lawfulness and legitimacy of their activity. However, it is computationally infeasible for the committee to perform all necessary checks for each organization. To overcome this, auditors assist in this process: organizations give access to all their internal data to their auditors, who then produce reports regarding the consistency of the organization's data, alerting the committee to any inconsistencies. Despite this, numerous issues that result in fines annually revolve around such inconsistencies in bookkeeping across organizations. Notably, committees wishing to verify the correctness of auditor-provided reports need to redo all their calculations; a process which is computationally proportional to the number of organizations. In fact, it becomes prohibitive when considering real-world settings with thousands of organizations. In this work, we propose two protocols, CLOSC and CLOLC, whose goals are to enable auditors and a committee to verify the consistency of transactions across different ledgers. Both protocols ensure that for every transaction recorded in an organization's ledger, there exists a dual one in the ledger of another organization while safeguarding against other potential attacks. Importantly, we minimize the information leakage to auditors and other organizations and guarantee three crucial security and privacy properties that we propose: (i) transaction amount privacy, (ii) organization-auditor unlinkability, and (iii) transacting organizations unlinkability. At the core of our protocols lies a two-tier ledger architecture alongside a suite of cryptographic tools. To demonstrate the practicality and scalability of our designs, we provide extensive performance evaluation for both CLOSC and CLOLC. Our numbers are promising, i.e., all computation and verification times lie in the range of seconds, even for millions of transactions, while the on-chain storage costs for an auditing epoch are encouraging i.e. in the range of GB for millions of transactions and thousands of organizations.