It means that if Person A owns something and transfers the ownership or value of it to Person B there will always be a record in the blockchain that Person A owned it. It also guarantees that the record cannot be manipulated—no one can change the record. This level of immutability is why blockchain technology is commonly referred to as a “trust machine”. The basics of accounting and auditing are notaffected by the implementation of blockchaintechnology;2however, blockchain does add risk toconsider and controls to test. In this post, we’ll focus our attention on how blockchain affects the accounting industry and what impacts this technology can have on your small business finances.
Accounting and auditing with blockchain technology and artificial Intelligence: A literature review
Addressing such changes in education through content and delivery is necessary to ensure that graduates have up-to-date and workplace-relevant knowledge and can keep up with global accreditation standards and professional qualifications (Al-Htaybat et al., 2018). Teams, management and government bodies implementing blockchain and making decisions activity cost driver definition based on data obtained from blockchain will also need new skills to adapt to the changing environment (Pimentel et al., 2019; Siew et al., 2020). Therefore, we propose that universities and higher education institutions should change and improve the curriculum of accounting and finance programmes to help students develop the above-mentioned skills.
Deloitte COINIA and the future of audit
With smart contracts, transactions automatically go through when certain conditions are met. This helps accounting professionals and organizations automate jobs like payroll and reconciliations.This would save organizations on costs linked to manual entry errors such as administrative expenses. With Deloitte COINIA, hundreds of thousands of addresses can be loaded in bulk for a variety of crypto assets, and Deloitte can see 100 percent of the transactions and reconcile them to clients’ books and records. Deloitte COINIA also assists with off-chain verification of private key ownership by using an innovative, custom-developed workflow to confirm the integrity of a signed message. The tool is compatible with multiple public blockchains and digital assets, including Bitcoin, Bitcoin Cash, Ethereum, Ethereum Classic, Litecoin, Ripple, Dash, and all ERC20 tokens, with more being added on demand. You know, I think in the early stages of blockchain we said this was going to really be massively disruptive because everybody was going to start doing transactions in blockchains.
The third risk relates to flawed smart contracts that can hide malicious code or another contract with a weakness. This risk highlights the need for independent external auditors to approve transactions before the contract enters the blockchain. In short, the ability operating revenue of blockchain to store records makes it a target for potential cyberattacks. Therefore, to ensure the security of information in a blockchain, there is a need to implement internal and cybersecurity controls that consider privacy preservation issues (Chohan, 2017; Coyne and McMickle, 2017; O’Leary, 2017). What could be an even more profound transformation of the profession is how the work of accountants might no longer involve only recording transactions. In future, accountants may need to provide professional judgements during the accounting process (McGuigan and Ghio, 2019; Dai and Vasarhelyi, 2017).
A well-developed regulatory framework may help tokens become a legitimate means of exchange in ecosystems that will start growing in the future. Further work is required from accounting bodies to accept new types of digital assets and develop standards that will solve the issues related to their recognition, measurement and disclosure. In the future, the implementation of blockchain may also raise questions related to the regulation of social and environmental accounting that becomes possible with this technology. All this will help to improve transparency further and decrease information asymmetry in the market.
1 Results of LDA analysis
- However, Alles (2018) warns that there is a danger of the “empirical takeover” effect when papers become empirically driven.
- From this, we contribute and provide a comprehensive picture and critique of the literature on blockchain in accounting.
- Blockchain is a technology that promises to change the way business is done.
- Rather, accountants will likely retain some old functions, either as-is or modified to suit the new paradigm, and find they have an entirely new set of responsibilities, some of which will require them to develop new skills.
- Other authors have also proposed different ways of applying blockchain technology in accounting and auditing (e.g. Yu et al., 2018; Kokina et al., 2017; Faccia and Mosteanu, 2019; Bonsón and Bednárová, 2019), without offering a comprehensive overview.
However, with the blockchain comes a number of additional demands, especially as it becomes more and more embedded within mainstream finance. Along with data analytics and machine learning, the blockchain will make some more tedious tasks easy to automate, but accountants will be needed to ensure accuracy and provide the analysis of the information their employers or clients need. As with any profession, expertise is what accountants get paid for, and now, such expertise will be needed more than ever to analyze financial results rather than focusing on the mundane tasks of reconciling and verifying transactions. The subject of cryptocurrency is complex, and its decentralized nature means there are a number of regulatory issues accountants will eventually have to deal with. Furthermore, governments are typically reluctant to fully embrace financial and monetary changes that they can exert little control over. As discussed in Section 5.1, most papers on the changing role of accountants are normative.
Blockchain technology reduces the possibility of disputes by fraudsters and scams. This reduces risks for all parties who use blockchain technology for accounting purposes. It also saves businesses a lot of time from having to deal with fraud or trying to collect money from dishonest organizations.
Combined with manual analysis, these data will help to chart new paths forward for researchers. At the same time, these innovations can create a favourable organisational climate that can overcome barriers and resistance to change (Clohessy and Acton, 2019). Future research might therefore investigate the structure of management bodies and the role of top management in blockchain implementation. Currently, regulators monitor the field of cryptoassets on a case-by-case basis, but not to the extent that investors, or would-be-investors, could determine with certainty how cryptoassets may be treated (Smith et al., 2019).
As shown, all but one of the ten most-cited articles were published in ranked accounting journals. In fact, three were published in the Journal of Emerging Technologies in Accounting. Additionally, the topics cited match the topics revealed by the LDA analysis, particularly new challenges for auditors, opportunities and challenges of blockchain applications, and capital expenditures the regulation of cryptoassets.