Blockchain runs on an Internet based peer-to-peer (P2P) system, which uses computer-powered cryptography to allow the exchange of value (Bible et al., 2017). Blockchain originally gained popularity in its use for Bitcoin exchanges. The emerging technology in blockchain use has the ability to affect accounting professionals and auditing of financial statements. Computers on a blockchain network are referred to as nodes (Bible et al., 2017). They are used to record and verify transactions so that people on a P2P network can view everyone else’s entries and complete transactions in real time (Fuller & Markelevich, 2019). It reduces the need for traditional money transaction methods such as bank and credit card transactions (Tysiac, 2017). Numerous individuals in a P2P network can make entries, which are time-stamped to prove authenticity. Data is stored in blocks, which are bound in cryptographic encryptions referred to as the chain (Bible et al., 2017). Blockchain networks do not have a central control power; therefore, data is managed through clusters of computers referred to as nodes.
Blockchain is widely known for its cryptocurrency uses but has far wider applications in the accounting profession. It is the natural successor of the paper trail methods and cloud based systems that accountants currently use (Fuller & Markelevich, 2019). It can record and store financial transactions, liabilities and assets. Blockchain provides two main benefits crucial to the accounting profession namely immutability, and transparency. Accounting firms must ensure that their systems are easily accessible to authorized persons and secure from intruders (Fuller & Markelevich, 2019). Immutability in a blockchain means that ledgers cannot be destroyed or manipulated by unauthorized parties. CPA companies can streamline their processes while ensuring that data is secure. Blockchain offers transparency through its peer-to-peer system. All transactions going through nodes in the database are connected, with each having an original and identical copy of the ledger (Bible et al., 2017). Once a new transaction is registered on the network, all the ledgers are updated with new information. It improves accounting efficiency and reduces errors. Additionally, the technology has led to automation in the financial field. Although automation is seen in a negative aspect of job losses, and displacement of some professionals in the field of finances, it has lead to a redefining on the way accounting professionals will be educated in the future (Fuller & Markelevich, 2019). In a positive look, automation will increase efficiency likely to unlock opportunities for professionals in the current and future revenue opportunities (Fuller & Markelevich, 2019). Besides automation, blockchain technology will enable continuous reporting in the accounting field. One of the major complaints with financial reporting and accounting processes is the provision of outdated information. To enable timely financial analysis and discard the traditional accounting practices, accounting processes will have to evolve and change in the face of technological disruption (Fuller & Markelevich, 2019).
Delegate your assignment to our experts and they will do the rest.
The growing need for a secure and faster system of accounting makes blockchain a very suitable alternative. It also leads to concerns over the future of CPAs in auditing (Tysiac, 2018). A blockchain system has the ability of using P2P systems to create a triple entry ledger with the ability to automatically register and authenticate transactions. It completes the task virtually and in real time, which will potentially lead to some CPA professionals losing their jobs because a blockchain system can complete accounting tasks in much, reduced spans of time (Tysiac, 2018). Once blockchain has been completely integrated into accounting firms, clients will have access to their information in a safe and secure environment where other concerned parties can also access ledgers easily (Fuller & Markelevich, 2019). Developing such a system will require new accounting software since current systems are not compatible with blockchain technology (Fuller & Markelevich, 2019). Accountants must adapt to new roles such as interpretation and categorization of information.
Blockchain technology has the capability of having immense impact on the accounting profession. For many accountants, blockchain may not come as a welcomed change since it significantly reduces their roles (Tysiac, 2018). However, they have to embrace the numerous benefits that it offers to the industry. Through smart contracts, accountants can automatically simulate most of their tasks reducing the amount of auditing work done at the end of the month (Fuller & Markelevich, 2019). Blockchain might come at an expense to CPA companies, but the long-term cost savings are worth the investment (Tysiac, 2017). Fraud can be reduced significantly by making all transactions open to members in a P2P network. Members of the accounting profession must be ready for the rapid changes bound to occur by gaining a deep understanding of how the technology works (Tysiac, 2018). Immediate identification of standards and regulations in the use of blockchain technology is required to facilitate smoother transition into the new system.
References
Bible, W., Raphael, J., Riviello, M., & Taylor, P. (2017). Blockchain Technology and Its Potential Impact on the Audit and Assurance Profession. Deloitte & Touche LLP , 1-28.
Fuller, S., & Markelevich, A. (2019). Should Accountants Care About Blockchain? The Journal of Corporate Accounting & Finance , 1-34. https://doi.org/10.1002/jcaf.22424
Galarza, M. (2018, February 7). How accountants can prepare for the blockchain revolution. Accounting Today , 1-4.
Tysiac, K. (2017, December 4). Blockchain considerations for management and auditors. Journal of Accountancy , 1-3.
Tysiac, K. (2018, March 15). How blockchain might affect audit and assurance. Journal of Accountancy , 1-3.
