Blockchain Technology: Shaping the Future of the Accountancy Profession

blockchain accounting

Finally, albeit in a different scope, Kotb et al.’s (2020) structured literature review examines research related to artificial intelligence (AI), paving the way for an open discussion on the effects of technology. A more fundamental area of future research is the role of financial intermediaries and how their role might change. In the future, we expect to see competition and cooperation among traditional and new intermediaries, and research needs to explore these phenomena to provide guidance to all participants such as incumbents, new entries and regulators (Cai, 2018). The influence of blockchain on risk management and companies’ performance indicators is another promising area for future research as there is a need to identify how stakeholders’ value creation may be affected by implementing blockchain (Cai, 2018). It would also be worth examining whether the response of managers towards blockchain varies in different industries (Cao et al., 2018). Burragoni (2017) argues that implementing blockchain in the finance industry might help overcome the threat of a shadow economy, given the improved transparency and legitimacy on offer, but this is an assumption that needs further justification.

blockchain accounting

Moreover, as the technology grows, the algorithms become more complicated, and more time and energy are required to validate transactions. We argue that in the future, researchers should investigate the sustainability and environmental issues related to blockchain in more detail. We believe that a specific theory to explain accounting blockchains could be drawn from the papers of Cai (2021) and Carlin (2019). They note that blockchain could induce a radical change in the field of accounting, namely, a shift to triple-entry bookkeeping. The advantages of triple-entry bookkeeping are that it increases transparency, reduces the time lag between fact and reporting, facilitates real-time accounting, reduces the possibility of manipulation and allows complete audits of whole recorded populations (Carlin, 2019).

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). The articles retrieved from Scopus were compared with the Web of Science database to ensure no significant sources were missed.

Financial Services

Blockchain 2.0 includes the economic market and extends to transactions, such as stocks, bonds and smart contracts. Finally, Blockchain 3.0 focuses on applications of Blockchain 1.0 and 2.0, such as digital voting, digital health records and digital art. This analysis covers the third phase, starting in 2015 with an exponential increase from 2016 to date (Figure 1). Zemánková (2019)’s analysis reviews the literature on blockchain and AI in accounting, focusing on smart contracts and smart audit procedures, highlighting current applications and tools developed by practitioners. Finally, after 2016, researchers focus mainly on blockchain techniques and smart contracts. Xu et al.’s (2019) analysis reviews 756 academic research papers on blockchain retrieved from the Web of Science database using bibliometric and cluster analysis.

However, the recent past and the near future of blockchain are firmly anchored to the development of financial instruments and cryptoassets (second cluster). Some authors (Chang et al., 2019; Kumar et al., 2020) suggest that future supply chain systems will be formed through integrations of blockchain into current systems, and a hybrid system with public on-chain data and private off-chain data will be used. Furthermore, major complementarities emerge between blockchain and RFID (van Hoek, 2019), IoT and ERP (Kayikci et al., 2022).

Volunteering roles

Therefore, we assume that automating data collection and storage using blockchain will not mean the auditing profession disappears. Rather, we see it evolving into a new role within companies and the ecosystem of hedge fund administration services. 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). Moreover, with an increase in the number of cryptoassets and initial coin offerings (ICOs) accountants may also need to develop their skills as advisors and consultants on how to report these kinds of assets and transactions. Further, if blockchain is implemented on a broad scale, accountants will not only have more information for planning and control, they may be required to synthesise it.

  • As suggested by the authors, future research works could deepen the investigation field, leading to additional keywords and results.
  • This section provides an overview of the research methodology employed in this study, which aims to examine the factors influencing the adoption of blockchain and cloud-based technologies for sustainability accounting among Chinese businesses.
  • The triple entry system helps you to analyze all the financial reports and government transactions of the company.
  • The fact is we are still uncertain if they are going to be as huge as predicted.
  • Mainly, the first node with height 1 refers to the traceability and transparency of corporate voting.
  • However, variations in this relationship emerge depending on contextual factors such as region and industry characteristics, highlighting the necessity for more nuanced and multi-attribute models.

Qualitative analyses have found that industry-specific factors play a role in motivating reporting practices, which are based on the material environmental, social, and governance issues that are unique to each industry classification. These material concerns are dependent on factors such as production processes, environmental impacts, and stakeholder interactions, which vary across different industry classifications. Regulatory efforts often focus on industries where these material issues are particularly pronounced, such as the energy and utilities sector. Chinese enterprises are capitalizing on various opportunities presented by cloud-based solutions to drive sustainability and operational efficiency. Huawei, a leading technology company, has developed a cloud-based “mirror world” in the construction industry.

More Resources on Small Business Accounting

A GL includes all the assets, liabilities, equity, expense, and income ledgers, which make up a complete set of the financial transactions records. Blockchain is a decentralized, distributed ledger that focuses on the ownership and transfer of assets. It records transactional data in a way that’s almost impossible to manipulate. 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. Auditors spend much time checking journal entries, trial balances, and supporting spreadsheets. The introduction of blockchain accounting helps them in a significant time reduction.

blockchain accounting

Ruf et al. [28] analyze regulations, challenges, and potential areas for improvement. Lau et al. [29] present recent case studies that shed light on ESG disclosure practices among prominent Chinese companies. However, it is worth noting that most of the existing literature predates significant technological advancements in blockchain and cloud computing. Blockchain technology proposes an alternative accounting information system that mitigates the challenges faced by the current double-entry system and transforms the technological skill set and focus of the profession. It promises to provide better data quality, increase financial reporting transparency, and provide real-time reporting in an environment that increases trust and lessens the opportunity for fraud. CPAs will need to acquire a working knowledge of the blockchain and smart contracts to navigate in this new triple-entry accounting environment.

What Does it Mean for the Accounting Profession?

This means that it’ll also save you and your bookkeeper tons of time while also making it easier to audit your own financial records. During an audit, an accounting professional can easily confirm that a transaction happened, but the transaction details aren’t recorded. Blockchain technology will reduce the need to follow paper trails as the blockchain would be enough to prove many parts of a traditional audit. If an organization modifies a transaction’s data in the blockchain, it’ll affect the hash value.

3 Methods of analysis: Latent Dirichlet Allocation combined with manual analysis

This element, 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). The blockchain features show that both cryptography and the hashing process are two elements of protection and assurance concerning the consensus mechanism. This subsection aims to analyze the technical types of blockchain, according to O’Leary (2017).

3 Search for the literature

She has authored several papers in the field of strategy, intangibles and sustainability. (2018), “Auditing with smart contracts”, International Journal of Digital Accounting Research, Universidad de Huelva, Vol. Therefore, future research should avoid descriptive analysis and focus on interviews and case studies to create a fruitful collaboration between academics and practitioners. Finally, verifiability is reconciled with the theoretical component of auditing, which requires audit committees to check corporate effectiveness measures frequently (Bédard and Gendron, 2010).

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