This risk highlights the need for independent external auditors to approve transactions before the contract enters the blockchain. In short, the ability 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). With the ability to autonomously execute some audit procedures based on blockchain, smart contracts will provide stakeholders with already partly verified information (Rozario and Vasarhelyi, 2018).
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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). For the accounting, auditing and accountability sector, 16% consider blockchain creation with hybrid structures. For instance, Rozario and Vasarhelyi (2018) identify hybrid models as holistic models capable of including both internal and external centralized audit procedures. Besides, starting from the need to respect corporate data privacy, Schaefer and Edman (2019) propose a hybrid architecture governance without public or private authorization.
Literature review and hypotheses development
(2018), “Auditing with smart contracts”, The International Journal of Digital Accounting Research, Vol. A systematic review and research agenda from the perspective of sustainable development goals (SDGs)”, Business Strategy and the Environment, (August), Vol. Van Hoek (2019) notes that a need for transparency and visibility motivates blockchain implementation and that the main barrier facing such an implementation is a lack of understanding of how to professionally ask for payment from clients template how to integrate and leverage blockchain investments. We could consider accounting for cryptos as financial instruments, taking into account the speculative nature of the motivation underlying companies’ decisions to buy and sell these items. According to IFRS9, this classification would allow valuation at fair value. However, cryptocurrencies do not meet the financial asset definition provided by IAS32 (Procházka, 2018; Morozova et al., 2020).
Navigating the Future: Blockchain’s Impact on Accounting and Auditing Practices
As discussed in Section 5.1, most papers on the changing role of accountants are normative. They talk mainly about various assumptions over how blockchain may influence accounting. One of the main changes frequently discussed is how blockchain will change the way accountants collect information. Given this, we think the future will result in more case studies and practically-oriented papers that empirically test blockchain’s impact on accounting (Alles, 2018). According to Zhang et al. (2017), new business reporting models, such as triple-entry accounting, will demand investigations into how blockchain strengthens or alters functions like valuations and contracting.
Blockchain in the accounting, auditing and accountability fields: a bibliometric and coding analysis
It’s immutability and decentralized nature make it unique, but its function of recording transactions makes it familiar to those in the accountancy profession. Developing professional knowledge and understanding of this emerging technology and its applications will be crucial to ensuring the profession’s relevance and future readiness. Each of the papers on this topic discusses ideas about how the role of accountants and accounting treatments would change if/when blockchain becomes a mainstream technology.
- Parmentola et al. (2022) conclude that blockchain could create a more sustainable supply chain in line with the sustainable development goals.
- They are designed to leverage the advantages of the two main types of blockchains that are used today.
- For example, several authors discuss the advantages of using blockchain to record transactions on a real-time basis (Yermack, 2017; Dai and Vasarhelyi, 2017).
- Proficiency in programming, Smart Contract Development, cryptography, and understanding Blockchain protocols is crucial.
- And in some ways even the, you know, the bitcoin drop was probably a good thing overall for the marketplace.
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Second, this study investigates how accounting practice will be impacted by blockchain. Blockchain can improve information timelines and accounting reliability because of its decentralization and transparency, but it will also require new competencies, attention to scalability and accounting standard reconciliation. Imagine the power of this technology combined with Artificial Intelligence (AI) where the testing for discrepancies through analytical https://www.business-accounting.net/ review could take place in real time and without the risk of missing transactions or the auditor having a blind spot in analyzing the information. Blockchains and their almost immediate provision of an immutable record of transactions provides for shared transaction information, automatically synchronized across each location. Such a provision of information removes transaction level reconciliations and facilitates developing continuous auditing.
It should therefore be unsurprising to consider that this revolution will start to change the nature of accounting and, in turn, the work of its practitioners and theorists (e.g. Yermack, 2017; Schmitz and Leoni, 2019; Yu et al., 2018). Blockchain technology uses various methods, such as encryption, digital signatures, and cryptographic keys, to protect data from unauthorised access and manipulation. Transactions are immutable, meaning they cannot be changed or deleted once the network validates them. It prevents fraud and corruption and ensures the integrity and reliability of the data.
This raises sustainability questions and may not be an issue that gets resolved until renewable energy accounts for most of our energy production (Coyne and McMickle, 2017). Three further risks are often raised, each surrounding changing business processes (Canelón et al., 2019; Coyne and McMickle, 2017; Kokina et al., 2017). The first relates to the centralisation of computing power, also called the “51% attack risk”, which can happen when most of the computing power in a blockchain’s network is centralised.
In the case of auditors, blockchain makes it possible to validate and request clarifications immediately by resolving errors or identifying potential attempts at corruption and fraud (Birch and Parulava, 2017; Horner and Ryan, 2019). 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 https://www.quick-bookkeeping.net/how-to-calculate-gross-profit-margin/ 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). The first is proposed by Ijiri (1986), who suggests the use of a third layer to measure momentum income. The second idea, which refers to accounting blockchain, is that of Grigg (2005).
Still, we analyze the characteristics of blockchain while providing indications of the definitions and technical structures most used in the literature. Furthermore, our analysis looks beyond blockchain and attempts to define, whenever possible, a connection with other technologies paving the way to new future research. Finally, we aim to explain what definitions of accounting theory are most used. First, in line with Garanina et al. (2021), Mancini et al. (2021), Lombardi et al. (2021) and Secinaro et al. (2021), the research on blockchain in accounting studies is primarily qualitative. Contrary to other studies, our SLR was updated at the beginning of 2022; therefore, it includes the most recent literature reviews published on the topic. However, especially in light of other SLRs on similar topics, we see an opportunity to perform future in-depth analyses to test new methods, including empirical and quantitative methods.