The result was reduced audit time and enhanced confidence in financial reporting. Central to this accounting approach is the general ledger, a comprehensive record that contains all financial transactions of a business entity. The ledger is organized into individual accounts representing assets, liabilities, equity, revenue, and expenses. Each transaction is recorded in the appropriate accounts, maintaining a clear audit trail of financial activities. Furthermore, smart contracts, self-executing code residing on the blockchain, enable automated and predefined actions when certain conditions are met.
- As blockchain is a new technology, the first research area aims to discover which accounting and auditing problems blockchain can solve and whether accountants see it as an opportunity to leverage their capabilities or a threat that can make their job obsolete.
- The weight of a node is based on the number of occurrences of the corresponding keyword.
- (2021), “The disruption of blockchain in auditing – a systematic literature review and an agenda for future research”, Accounting, Auditing and Accountability Journal, Vol.
- By recording each step of a product’s journey on a shared ledger, they minimized the time required to track the source of contaminated food, improving consumer safety.
Auditors can redirect their efforts towards analyzing complex data patterns and making strategic recommendations, enhancing the audit’s value. The integration of blockchain technology into accounting and audit processes has opened up a realm of possibilities for reshaping the way financial data is managed, audited, and reported. The integration of blockchain technology into accounting practices also has a profound impact https://quickbooks-payroll.org/ on the role of auditors. Auditing, a cornerstone of financial accountability, is poised to undergo a transformation with the advent of blockchain. With transactions being recorded in a shared and unalterable ledger, the need for time-consuming manual reconciliations is significantly reduced. This shift enables accountants to focus on more value-added activities, such as data analysis and strategic financial planning.
The implementation of the technology involves addressing significant challenges, but also has numerous potential advantages. Despite challenges like scalability, interoperability, and regulatory alignment, the adoption of blockchain in accounting promises an efficient, accurate, and collaborative future. As organizations invest in the necessary talent and infrastructure, blockchain’s role in accounting will expand, driving enhanced transparency and efficiency across financial ecosystems.
Future of blockchain technology in accounting
Now the received invoice can automatically be processed by the bookkeeping, saving time for administrative staff. Dr. Sean Stein Smith DBA, CMA, CPA, CGMA, CFE is an Assistant Professor at Lehman College (CUNY). Prior to his current role, Sean worked for several private sector organizations, both in the for profit and non-profit sectors, where he played key roles in technology upgrades, reporting improvements, and change management. Sean has also been published in multiple academic journals for his research on integrated financial reporting. His dissertation “The Effect of Integrated Financial Reporting on Financial Performance” compares the financial performance of publicly traded organization that utilize an integrated financial reporting versus comparable organizations that do not.
3 Blockchain potential in business models and supply chain
The dilemma of adopting blockchain in accounting and auditing is in finding the right trade-off between information confidentiality and transparency. The simultaneous protection of data privacy and maintenance of data accuracy is an important area for future research. Further, the ways of creating effective smart audit contracts and smart reporting contracts should also be studied with a special focus on executing traces and enforceability (Schmitz and Leoni, 2019). Implementing blockchain may benefit most accountants and auditors, but it may be negatively perceived by those who work in the black economy, those who are keen on earnings management, and those who need to manipulate the appearance of illicit transactions. 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 blockchain accounting.
The efficiency of new business models in comparison to traditional ones may also bring new insights for academics and practitioners. Researchers should test new business models in a market and evaluate transaction efficiency and the degree of novelty in the transaction’s content, structure, steering, resource use, network effects and value creation for stakeholders. Researchers can analyse the efficiency of blockchain implementation in different areas and focus on “the benefits of the first-mover advantage” (Karajovic et al., 2019, p. 322).
The fundamental problem that blockchain solves in accounting
We selected the research articles for this study following a three-phase procedure. (2020), “Challenges when auditing cryptocurrencies”, Current Issues in Auditing, Vol. Christ and V Helliar (2021) show that blockchain also makes it possible to monitor workers’ rights, but there are some privacy concerns that must be addressed. Moreover, Autore et al. (2020) found that a firm announcement regarding its investment in blockchain leads to an increase in its stock price. However, these findings contrast with Austin and Williams (2021), who state that there is no evidence that disclosing information about blockchain investments positively affects investor judgments. The authors in the fourth area engage with empirical evidence and analyses, aiming to test how and why blockchain is implemented.
Figure 1 demonstrates that the volume of articles on the topic is increasing annually. The first articles began to appear in 2015 and, by 2019, 4 articles had increased to 40 papers, with 35 already published just in the first half of 2020. (2018), “Auditing with smart contracts”, The International Journal of Digital Accounting Research, Vol. (2019), “NFTs in practice – non-fungible tokens as core component of a blockchain-based event ticketing application”, Paper presented at the 40th International Conference on Information Systems, ICIS 2019.
Afterwards, we will go back to the root of the problem that blockchain aims to solve, followed by the most viable solution to address these challenges now and in the future. Today we see the blockchain used in different contexts that do not reach adoption. The primary reason for this is a need for more education about the various aspects of the protocol.
Unfamiliarity With Technology
All recorded entries can be evaluated with the corresponding and reference entries in the blocks. But still, auditors need to stay aware and cope with the accounting policies regularly to hone their skills constantly. The aim is to provide a snapshot of some of themost exciting work published in the various research areas of the journal.
Blockchain is not yet a mainstream accounting topic, and most of the current literature is normative. The four most commonly discussed areas of blockchain include the changing role of accountants; new challenges for auditors; opportunities and challenges of blockchain technology application; and best business credit cards 2014 the regulation of cryptoassets. While blockchain will likely be disruptive to accounting and auditing, there will still be a need for these roles. Our aim with this paper was to define the key topics and trends, past, present and future, that concern researchers in blockchain for accounting.
There is also a need to work on legal and taxation policies for tokens, bitcoins and other cryptocurrencies so that they become valuable tools and stable assets in capital markets. With the improved regulatory framework, we also propose that in the future governments may develop national cryptocurrencies, e.g. crypto-euros or crypto dollars, that will be easier and faster to use compared to existing currencies. 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.
The adoption of blockchain technology along with artificial intelligence technologies and, more specifically, machine learning is happening at a fast rate. Ernst & Young (EY), a leading global professional services firm, utilized blockchain for inventory auditing. They developed a blockchain-based platform to reconcile and verify inventory items for a wine distributor in an efficient, accurate, and tamper-proof manner.
Blockchain technology and AI are disrupting, changing, and transforming accounting, and are viewed by some practitioners as a threat to the status quo, future employment, and the future of accounting. Taking a step back, analyzing and acknowledging that these trends present both opportunities and challenges, enables professional to adapt, evolve, and elevate accounting to the role of strategic business partner. Although blockchain technology has been around for decades, there has been a strong uptick in developers and adopters in the space. Many experts believe we are years away from mainstream adoption, while others claim with the advent of AI and ML, the prospect of blockchain technology will be exponential. But what can we do as individuals and as organizations to prepare for a change in “the way we work”? From an individual perspective, having an awareness of the technology through available self-study could help set a foundational understanding.