As these transactions are verified and time-stamped, the need for external audits may decrease, as auditors can directly access and analyze the immutable blockchain records. Auditors’ responsibilities shift towards validating the processes surrounding blockchain implementation rather than solely focusing on data verification. They will play a pivotal role in ensuring that smart contracts are appropriately designed and executed, and that the internal controls governing blockchain transactions are robust and compliant. The integration of blockchain technology into accounting practices also has a profound impact on the role of auditors. Auditing, a cornerstone of financial accountability, is poised to undergo a transformation with the advent of blockchain. Blockchain’s ability to create a secure, shared, and synchronized digital record of transactions means that all parties involved in a financial transaction can access the same information in real-time.
It is unlikely that small firms would want to make their transactions publicly available or that they would benefit from blockchain accounting as much as big companies. Distributed ledgers may not be attractive or even needed by every company, so there is a real need to ascertain exactly what the up and downsides of implementing blockchain are. As O’Leary (2019) observes, the opportunities for using blockchain may be limited by the desire and ability of all agents in the ecosystem to implement it. As such, a literature review on the status of blockchain in accounting is both topical and timely. The insights provided into this emerging technology will have implications for the accounting ecosystem–some beneficial, others challenging. Hopefully, this SLR will serve as a helpful baseline for practitioners, professionals and academics as we navigate the next potential revolution in accounting information systems.
To gain real efficiencies in the use of blockchain or any technology, there is a need to reengineer, rather than just automate, existing processes. Unfortunately, many of the proposals for the use of blockchain are aimed at automating existing processes, typically in an approach to leverage the immutability and digitisation of paper, but generally do not propose or use changes in the processes. Even though, for most industries, blockchain is still a new and not yet well-established technology, the World Economic Forum estimates that, by 2025, at least 10% of global gross domestic product (GDP) will rely on blockchains.
How Does Blockchain In Accounting Work?
Users control the addition of millions of transactions trying to post a sync at once by grouping these into blocks and adding blocks one at a time, in sequence. Blockchain in accounting offers tangible benefits for business owners, revolutionizing financial operations. The technology’s transparent and immutable ledger ensures accurate and tamper-proof financial records. This enhances accountability and reduces the risk of financial discrepancies or fraudulent activities. Blockchain holds the potential to significantly support accountants by transforming traditional practices. Its transparent and tamper-proof ledger enhances the accuracy of financial data, reducing the risk of errors and fraud.
Our analysis considers Blockchain and accounting, or auditing, or accountability as primary keywords. In a critical study published in the AAAJ, Dumay et al. (2018) state that scientific production in accounting includes and is extended to auditing and accountability. Furthermore, all researchers have benefited from Massaro et al. (2016)’s research strategy. Considering that we are analyzing an emerging and continually evolving field of research, we included all sources in the database, including peer-reviewed articles and conferences as sources of knowledge (Easterby-Smith et al., 2012). We used Scopus, a multidisciplinary database that includes the study of several data-suited information science researchers (Okoli and Schabram, 2010).
Another part of this research topic focuses on studying the financial performance of cryptocurrencies (Trucíos, 2019; Le et al., 2021). Alfieri et al. (2019) argue that Bitcoin is similar to common stock, has an excellent risk–return profile and represents an opportunity for portfolio diversification. Polasik et al. (2015) find that the price of Bitcoin is influenced by the number and tone of related newspaper articles and Google searches.
- Figure 1 shows the distribution over time of the included research products.
- Although blockchain is perceived by many to be just the foundation technology of cryptocurrencies it actually can serve large systems across a wide variety of industries.
- Blockchain is one of the most disruptive digital technologies (Carson et al., 2018; Ruzza et al., 2020), and interest in its applicability and effects has grown both from practitioners and academics.
- Figure 1 shows a considerable increase in interest since 2016, in which year accountants and practitioners began to seriously consider blockchain as an accounting tool (Kokina et al., 2017).
Moreover, the absence of standardized protocols and practices across different blockchain platforms poses challenges. The lack of universally accepted norms complicates integration efforts and interoperability between blockchain systems and traditional accounting software. Smart contracts offer revolutionary potential for automating intricate accounting processes.
Still, blockchain technology has the potential to result in a radically different competitive future for the financial services industry. A blockchain is a decentralized ledger of all transactions across a peer-to-peer network. Using this technology, participants can confirm transactions without a need for a central clearing authority. Potential applications can include fund transfers, settling trades, voting and many other issues.
Challenges to Auditors
This step also helped us validate that the papers and topics identified by the LDA analysis were among the most cited. The authors’ structured literature review uniquely identifies critical research topics for developing future research directions related to blockchain in accounting. For instance, we do not consider technical, legal or ethical issues, such as the security and privacy of data or the reliability of information entered in the blockchain. Methodologically, the use of the Scopus database does not allow the analysis of a large number of books or book chapters or non-peer-reviewed studies published on the topic of blockchain in accounting.
A common feature to accounting, auditing and accountability is decentralization. This feature revolutionizes how accounting data are accessed as it allows all actors in the chain to obtain history, real-time updating and final reporting. The consensus mechanism is the first feature of blockchain that allows all network actors to exchange data (Brown-Liburd et al., 2019; McCallig et al., 2019). This element, police full form, what is the full form of police although mediated by technology, has had positive evidence in both accounting and auditing theory. For example, the consensus mechanism appears to underpin the establishment of the global International Financial Reporting Standards (IFRS) framework (Sunder, 2009). Besides, there is evidence that consensus in accounting has a positive correlation with the accuracy of decisions (Ashton, 1985).
Blockchain’s benefits and unknowns
Smart contracts, a hallmark of blockchain technology, enable the automation of audit procedures. These self-executing contracts can be programmed to initiate audits based on specific triggers or conditions. For example, if a financial threshold is met, a smart contract can autonomously trigger an audit. This automation not only saves time but also ensures a consistent and systematic approach to auditing. Auditors can redirect their efforts towards analyzing complex data patterns and making strategic recommendations, enhancing the audit’s value.
How Blockchain Will Support Accountants
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). Nor are all market participants eager to treat cryptoassets as a security due to their volatility, making it difficult to ascertain an appropriate value to record for income statement and balance sheet purposes (Smith et al., 2019; Tan and Low, 2019). Finally, it is worth noting that financial accounting is characterised by accounting prudence and conservatism, which can lead to differences between a company’s market and book value (Dumay and Guthrie, 2019). As cryptoassets are often characterised as a potential future economic benefit, their acquisition may lead to even greater discrepancies between the market and book values of companies, especially in markets with optimistic valuations of intangible assets.
3 Blockchain potential in business models and supply chain
She is a Senior Lecturer in Strategy and Enterprise at the Lincoln International Business School and an honorary research fellow at the Sapienza University of Rome. She is an international assessor for the MIKE – Most Innovative Knowledge Enterprise Award for Italy and Iran. She was a visiting fellow and a guest lecturer at several Universities in Japan, Russia, Italy, Australia, Hong Kong and Iran. She has authored several papers in the field of strategy, intangibles and sustainability. (2019), “The forthcoming data ecosystem for business measurement and assurance”, Journal of Emerging Technologies in Accounting, American Accounting Association, Vol.
Blockchain Smart Contract Architecture
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