Blockchain as the Database Engine in the Accounting System

Abstract

This paper examines the prediction that blockchain technology will transform accounting and the profession because transactions recorded on a blockchain can be aggregated into financial statements and confirmed as true and accurate. We argue that blockchain technology affects the database engine of the accounting information system (AIS) through digitisation of the current paper‐based validation process. In a blockchain‐based AIS, accountants will no longer be the central authority but will remain the preparer of financial reports required by regulations; they will continue to influence policies such as the choice and accreditation of validators and serve as validators of last resort. Audit evidence still needs to be gathered for rendering of an audit opinion in a blockchain‐based AIS. While digitisation of the validation process reduces the error rate and lowers the cost of vouching and tracing, and immutability of blockchain data reduces the incentive and opportunities for fraud, a blockchain‐based AIS alone does not guarantee that financial reports are true and fair. Lower error rates and reduced incentives for accounting fraud in a blockchain‐based AIS are expected to improve audit quality. This prediction will need to be empirically tested when blockchain‐based AIS become available. Using the three‐tier architecture of the AIS, this paper addresses the gap in the literature that misses how characteristics of blockchain technology can influence the implementation of a blockchain‐based AIS with related implications for the accounting profession.

Big Data Analytics and Other Emerging Technologies: The Impact on the Australian Audit and Assurance Profession

“…Blockchain technology has been viewed by many scholars and practitioners as a threat to the status quo of the accounting and audit profession (Schmitz and Leoni 2019). It is specifically included in this research study as some studies (i.e., Coyne and McMickle 2017; CPA/AICPA 2017; Schmitz and Leoni 2019; Tan and Low 2019) highlight that blockchain technology has the potential to transform current accounting and auditing practices. Arguments have been made as to whether blockchain technology has the potential of making accounting information more trustworthy and timelier and to become a better alternative to current accounting systems (see, e.g., Coyne and McMickle 2017; Schmitz and Leoni 2019; Tan and Low 2019).…”

“…It is specifically included in this research study as some studies (i.e., Coyne and McMickle 2017; CPA/AICPA 2017; Schmitz and Leoni 2019; Tan and Low 2019) highlight that blockchain technology has the potential to transform current accounting and auditing practices. Arguments have been made as to whether blockchain technology has the potential of making accounting information more trustworthy and timelier and to become a better alternative to current accounting systems (see, e.g., Coyne and McMickle 2017; Schmitz and Leoni 2019; Tan and Low 2019). Due to such views being expressed publicly, accounting and auditing in the context of the blockchain development has recently become a topic intensively discussed by global accounting bodies and professional accounting and auditing firms and in the business media (see, e.g., CPA/AICPA 2017; ICAEW 2017, Carlin 2019).…”

The Impact of Artificial Intelligence and Blockchain on the Accounting Profession

“…d. Network consensus has improved the authenticity, reliability and timeliness of the data for the audited entity, laying a solid foundation for continuous audit and real-time audit work [85]. On the one hand, it is [79] Prove ownership…”

“…The only source of accounting data is guaranteed, and the accounting data cannot be falsified [86] The only source of auditing data is guaranteed, and the audit data cannot be falsified [87] Distributed ledger (Decentralized) [80] Enhance transaction transparency Improvement in the transparency of accounting information [81] Improvement in the authenticity and reliability of audit data [82] Timestamp [83] Clear transaction order Improvement in the difficulty of changing data and retain permanent accounting records [80] Improvement in the reliability and timeliness of audit data, and lay a solid foundation for continuous audit and real-time audit [84] Network consensus [85] Verify transaction legality Improvement in accounting efficiency; provision of real-time transaction clearing or settlement [88] Improvement in the authenticity, reliability and timeliness of audit data, and lay a solid foundation for continuous audit and real-time audit [89] Programmable [90] None…”

Blockchain, Climate‐related Risk Disclosures and EER

“…The second paper (Tan ) firmly situates blockchain in the accounting information system (AIS). It describes the concept of blockchain as a database.…”