Blockchain Explained and Implications for Accountancy

The use of smart contracts may also improve processes in a range of industries. Smart contracts on the blockchain execute when certain conditions are met without the need for trusted intermediaries to verify the fact (Coyne and McMickle, 2017; Kokina et al., 2017). There is already evidence to show how blockchain may reduce costs in the finance industry (e.g. Fanning and Centers, 2016; Kokina et al., 2017).

Some in our audience may think that blockchain has been in a bit of a lull. I mean, there was a ton of hype about how it was going to change everything and, you know, change wasn’t instantaneous. The blockchain has gone from the peak of inflated expectations down to the trough of disillusionment. But it’s maturing, and it may be changing very quickly what you hear, thanks in part to a decision or a release recently by the IRS. (2018), “Auditing with smart contracts”, International Journal of Digital Accounting Research, Vol.

  • To the best of our knowledge, this study is the first to examine the current state of blockchain’s diffusion within accounting, auditing and accountability using a bibliometric and coding approach.
  • Blockchain is not yet a mainstream accounting topic, and most of the current literature is normative.
  • Many current-day accounting department processes can be optimised through blockchain and other modern technologies, such as data analytics or machine learning; this will increase the efficiency and value of the accounting function.
  • 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 adoption of blockchain accounting demands skilled accountants and auditors.
  • Finally, the validity of the results can only be considered at the time of the analysis, as literature reviews “are not a panacea” (Massaro et al., 2015, p. 546).

In this way, the data stored in a blockchain can be validated and summed without revealing any details. McCallig et al. (2019) propose a blockchain system that overcomes the privacy issues the use of multiparty security and modular arithmetic. However, their system requires communication between all involved entity customers or suppliers. In this area, researchers study how to apply blockchain to accounting and design data flows and architectural features.’s third-quarter profits rise as supply troubles ease

Massaro et al. (2016, p. 2) characterise an SLR as “a method for studying a corpus of scholarly literature, to develop insights, critical reflections, future research paths and research questions”. The possibilities that blockchain brings to information disclosure, fraud detection and overcoming the threat of shadow dealings in developing countries all contribute to the importance of further investigation into blockchain in accounting. (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.

  • It will be important to monitor the progress in the take-up of blockchain in the future (Bonsón et al., 2019; Gietzmann and Grossetti, 2019; Bonsón and Bednárová, 2019).
  • This step also helped us validate that the papers and topics identified by the LDA analysis were among the most cited.
  • The distribution of the 93 items of the sample does not show significant concentration.
  • Although academic authors are more numerous than practitioner authors, the theoretical aspects of blockchain in this research area are currently unexplored.
  • Auditors will need to focus on how blockchain transactions are recorded and recognized in financial statements in addition to how critical elements like valuations are determined.

Since blockchain is just such an emerging topic in the accounting literature (Schmitz and Leoni, 2019; Bonsón and Bednárová, 2019; Yu et al., 2018), we decided to add papers not yet published in the accounting journals but uploaded to the SSRN. SSRN is the leading social science and humanities repository and online community that provides “tomorrow’s research today” (Gordon, 2016). With more than 950,000 papers from over half a million authors in the e-library, SSRN offers an extensive pool of research ideas that can be tracked before publication to detect emerging research topics and current trends. Here, we searched for “accounting” AND “blockchain” or “accounting AND distributed ledger” over the same period and found 68 papers, some of which overlapped with papers already retrieved. These were excluded, plus we also excluded any of the papers that had subsequently been published in a non-accounting journal or an accounting journal not ranked by ABS or ABDC.

Additionally, it is also a starting point for professionals to fully understand blockchain’s characteristics and potential with a constructive and systemic approach. And going back to blockchain, things like smart contracts, that’s absolutely something where the profession needs to play a role with the SOC standard and give some level of trust that people’s smart contracts are written properly. When we look at different blockchain examples, and we brought up many times today the Walmart example, tracking food. And when you begin to watch produce and different industry verticals leveraging blockchain technology in production today, all those firms leverage participants in the accounting profession.

Communities by industry / sector

Starting from these premises, this study aims to offer a bibliometric and open coding analysis of articles published in accounting, auditing and accountability to understand the state of the art, new research trends, future avenues and critique the research dialogue around these issues. It proposes a broader investigation that includes the study of the primary bibliometric data and coding analysis (Dal Mas et al., 2019; Massaro et al., 2016) of peer-reviewed journal articles, book chapters and, because of the novelty of the field, conference proceedings listed on Scopus. As a result of the above, the spectrum of skills represented in accounting will change. Some work such as reconciliations and provenance assurance will be reduced or eliminated, while other areas such as technology, advisory, and other value-adding activities will expand.To properly audit a company with significant blockchain-based transactions, the focus of the auditor will shift. In the long term, more and more records could move onto blockchains, and auditors and regulators with access would be able to check transactions in real time and with certainty over the provenance of those transactions.

Certain services may not be available to attest clients under the rules and regulations of public accounting. Please see /about to learn more about our global network of member firms. If this subject interests you, understanding closing your books will help you more easily see the promising value of blockchain. 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.

Deloitte COINIA and the future of audit

Although auditing will continue to evolve (as it always has), auditing is likely to be around well into the foreseeable future. Figure 2 compares the two kinds of blockchain projects (public/private). Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee („DTTL“), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as „Deloitte Global“) does not provide services to clients. In the United States, Deloitte refers to one or more of the US member firms of DTTL, their related entities that operate using the „Deloitte“ name in the United States and their respective affiliates.

(2018), “Auditing with smart contracts”, The International Journal of Digital Accounting Research, Vol. The advent of cryptocurrencies has also raised questions about the role of central banks. Currently, central banks continue to supply money, both virtually and physically.

Blockchain Technology: Shaping the Future of the Accountancy Profession

The LDA analysis unearthed ten topics, which we needed to find appropriate names for. First, we looked at the terms listed against each topic, then we read the most representative articles for each group identified by the model. One author then developed a descriptive title, which was reviewed and perhaps modified before being approved by the remaining authors. The final topic names are listed in Table 2, along with the 20 most important words for each topic and the marginal distribution of each topic. A systematic review and research agenda from the perspective of sustainable development goals (SDGs)”, Business Strategy and the Environment, (August), Vol.

The research questions in this area are related to the cryptoassets innovations in finance, whether and how cryptoassets should be reported in financial statements and whether they represent taxable events (Trucíos, 2019; Ram et al., 2016; Ram, 2018). Tiberius and Hirth (2019) confirm that auditors’ expectations align with those of academics, who believe that the role of auditors will not be filled by blockchain technology. Ferri et al. (2020) found that performance expectancy and social influence generally lead to blockchain adoption intentions. Kend and Nguyen (2020) found that auditors are skeptical of the usefulness of blockchain for auditing.

The potential of blockchain

With the World Wide Web, the first websites were rudimentary, but now are deeply embedded in daily lives and economies. So with blockchain, it will likely develop into and become a more prevalent feature of daily and economic life. The rapid evolution of technology is quickly changing the way business is conducted across all industries, accounting for medical practice even some that are centuries old. For example, artificial intelligence (AI) can drive down the cost of health care by more accurately determining correct drug dosages for patients and potentially reducing errors. It can also assist doctors with preliminary diagnoses of conditions such as skin cancers and help hospitals reduce wait times.

The adoption of blockchain technology in accountancy is already in progress, led by the top players in the industry. Here, the accountants in the coming years will have much more clarity regarding maintaining the accounting ledger. In simple words, blockchain accounting is implementing blockchain technology into the traditional accounting system. Here, the triple-entry method is used instead of the traditional double-entry method. This section identifies the most cited authors for the accounting, auditing, accountability and blockchain fields, analyzing whether they are scholars, practitioners or both.

Restoring trust in audit and corporate governance

Moreover, El-Haj et al. (2019, p. 292) recommend employing machine learning methods and high-quality manual analysis in conjunction as they “represent complementary approaches to analyzing financial discourse”. We followed this advice, applying a hybrid approach that comprised LDA analysis, citation analysis and a manual review. In Section 2, we discuss the concept of blockchain as an accounting technology. Section 3 outlines the methodology used for the review, followed by the results in Section 4. The most representative articles are analysed in Section 5, with future research directions discussed in Section 6.