The Future of Accounting: Blockchain Technology’s Impact

Blockchain, best known as the technology backing cryptocurrencies such as Bitcoin, can also increase security, transparency, and trust across a network of global users, automate financial processes, and help to reduce fees.

It’s not that accountants will be replaced by automation or AI any time soon; it’s that automation frees them up to focus on higher-value strategic functions, such as business analysis and consultant services.

Decentralization

Decentralising decision-making means that decisions made can reach where they are needed most operationally, and so managers are free to make far more strategic decisions about how the business should be shaped to grow and scale up. When successful, decentralisation can decrease the time pressures on leadership and increase business responsiveness.

Decentralisation can be carried out by central governments that delegate responsibility for planning, financing and implementation of specified functions of the public sector to existing districts or entirely new, semi-autonomous organisations (districts, municipalities), exempt from the usual civil service personnel restrictions and authorized to charge consumers directly for services delivered to them. (Photo by Ralph Orlowski/Getty)Or create public-private enterprises/corps/housing authorities/transportation authorities/special service districts/regional development corporations to this end.

The greatest advantage in decentralisation is to stimulate and strengthen the confidence and competence of all levels of employees, filter out those who can not shoulder their due responsibilities, encourage the self-reliance and initiative of the lower-level employees to take things into their own hands, as well as spread the power horizontally and not needfully burden the executives with trifling matters and allow them more time to focus on core business.

Transparency

First, blockchain-type technology offers secure, reconcilable record keeping. Second, real-time accounting promises to eliminate the time lags in the traditional accounting process, and continuous auditing promises to eliminate many of the traditional audit requirements so that accountants can focus on activities that add more value such as risk evaluation and proactive advisory services.

But this does not mean that traditional accounting will be replace by blockchain technology; instead, it will need to and will make accounting and recording processes more efficient. The information asymmetry among stakeholders may be reduced and distorted accounting data shared in a verifiable and agreed way with better possibility of being identified by AI technology to let managers manipulate disclosures and, at the same time, using less external auditors, the transaction costs should be cut, thus increasing the transparency to investors.

Trust

Blockchain tech with artificial intelligence (AI) and machine learning will, with time, disrupt the way accounting and auditing is done, but accountants will need to understand the technology in depth to service their clients in this manner.

Thanks to blockchain’s immutability, it will be far easier to verify data that accountants work with. Much of the need for manual ‘reconciliation’ will disappear, as will much of the need for ‘audits’ of financial statements. Real-time accounting also helps accounting be more trusted and transparent.

This paper presents an overview of all of the literature on blockchains in accounting to this date. We highlight some core themes, such as an event view of accounting; real-time accounting; triple entry accounting; and their role on accounting in the future. The paper provides a contribution to the debate on the role of technology in accounting; this contribution is of crucial importance in bringing to light some of the potential adverse side-effects of using blockchain applications withing the accounting profession.

Security

Blockchain is a technology that provides an open, distributed ledger that cannot be changed or tampered with. Records can be viewed by interested parties on a real-time basis without the need for third-party intermediaries who often need to intermediary on our behalf. Blockchain also provides increased accuracy and transparency to its users. Could this be what the accountant of the future needs?

Stakeholder theory suggests that blockchain would provide new financial ways of interacting with managers and accountants, business partners and investors who jointly work in different compartments of a network ecosystem. This could be done by using event approach accounting; real-time accounting; triple entry accounting and other; continuous auditing.

Transparent accounting systems, such as those based on blockchain technology, can also help keep the agency curse under control by mitigating information asymmetries and transaction costs, as well as reducing managerial incentives to cook the books. But it is not fraud-proof – for instance, if a single manager manages to get more than 51 per cent of the computing capacities of a blockchain network, he could still fake source data and the history of prior transactions – more research and testing are needed on risks pertaining to blockchain accounting technologies.

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