This transparency minimizes discrepancies and disputes, as everyone is operating from a consistent set of data. Additionally, the decentralized nature of blockchain reduces the reliance on intermediaries, which not only streamlines processes but also lowers costs. Even if you’re not using cryptocurrency, blockchain accounting can involve US dollars and other assets. Plus, understanding the basics of blockchain will help you follow future updates and be more prepared. Then when the time comes that blockchain technology directly impacts your business, you’ll be ready. Finally, in terms of blockchain structure, this research stream requires the application of hybrid blockchain because of the need for confidentiality related to firms’ information.
At its core, blockchain operates as a distributed ledger shared among participants, each possessing a copy of the entire chain. When a financial transaction occurs, it is grouped with other transactions into a block. This block is then broadcast to the network, where participants validate its accuracy through consensus mechanisms like Proof of Work or Proof of Stake. Instead of relying on a centralized ledger maintained by a single entity, blockchain employs a decentralized, distributed ledger shared among participants. Transactions are grouped into blocks, validated through consensus mechanisms, and linked in chronological order, creating a transparent and immutable chain of records.
It was originally developed to enable the use of the “cryptocurrency” Bitcoin. Many people believe it is the same thing as Bitcoin, which is a digital, portable asset. The concept of blockchain arose before Bitcoin’s implementation and it was was developed primarily to enable the use of Bitcoin. According to IBM, blockchain’s implementation outside of the “Bitcoin environment” was somewhat delayed, because established businesses and accounting professionals did not initially see its benefit in other industries.
- Reducing the lag time between when the information is requested and when it produced, in and of itself, will immediately be accretive to the performance of the firm.
- In the next subsection, we provide an analytical description of the coding framework adopted.
- So I actually think we’re in a good state, and I think this is excellent that we can, the firms can start working on this initial use case in a much broader way.
- The information is tracked with different hashes without the possibility of changes in each block (Kokina et al., 2017).
Therefore, future research may analyse the characteristics of teams and government bodies that work better together for the most efficient implementation and decision-making using blockchain. Currently, regulators monitor the field of cryptoassets on a case-by-case basis, but not to the extent that investors, or would-be-investors, could determine with certainty how cryptoassets may be treated (Smith et al., 2019). Nor are all market participants eager to treat cryptoassets as a security due to their volatility, making it difficult to ascertain an appropriate value to record for income statement and balance sheet purposes (Smith et al., 2019; Tan and Low, 2019). Finally, it is worth noting that financial accounting is characterised by accounting prudence and conservatism, which can lead to differences between a company’s market and book value (Dumay and Guthrie, 2019). As cryptoassets are often characterised as a potential future economic benefit, their acquisition may lead to even greater discrepancies between the market and book values of companies, especially in markets with optimistic valuations of intangible assets.
7 Bibliometric mapping/visualization
The lack of familiarity with blockchain concepts and practices might deter professionals from embracing the technology. Moreover, the absence of standardized protocols and practices across different blockchain platforms poses challenges. The lack of universally accepted norms complicates integration efforts and interoperability between blockchain systems and traditional accounting software. Blockchain’s transparency, coupled with its cryptographic verification mechanisms, simplifies the verification of financial records.
- Moreover, more theoretical investigations should be undertaken to ascertain how the triple-entry model can replace the double-entry (Cai, 2021; Secinaro, 2020).
- Sean has also been published in multiple academic journals for his research on integrated financial reporting.
- In a data ecosystem that progressively integrates a nearly infinite set of initially disconnected data, the ability to integrate coherently and apply software agents will be of high importance.
The PRISMA flow diagram depicts the flow of information through the different phases of a systematic review. It maps the number of records identified, included and excluded and the reasons for exclusions. Although auditing will continue to evolve (as it always has), auditing is likely to be around well into the foreseeable future. This means solvency vs liquidity they are taking blockchain more seriously and that it might be a good idea for you to as well. It’ll eliminate mundane jobs like reconciliation transaction data and having to put manual entries into your ledger. It protects the sensitive data of the transaction and acts as a receipt that verifies the transaction occurred at a certain time.
1 Bibliometric analysis
Audit and assurance professionals should stay abreast of developments and continue to learn more about blockchain business applications, blockchain in accounting, and blockchain audit technology. Ultimately, blockchain accounting empowers participants with accurate, tamper-proof records and fosters trust among stakeholders in intricate supply chain networks. Smart contracts, a hallmark of blockchain technology, enable the automation of audit procedures. These self-executing contracts can be programmed to initiate audits based on specific triggers or conditions. For example, if a financial threshold is met, a smart contract can autonomously trigger an audit. This automation not only saves time but also ensures a consistent and systematic approach to auditing.
Decentralized, distributed ledger technology
In this sense, code analysis allows us to discover new variables and better highlight possible future research journeys. (2018), “Auditing with smart contracts”, International Journal of Digital Accounting Research, Vol. The results of Table 4 allow us to confirm our choice of the topics for further analysis.
We used a Latent Dirichlet Allocation (LDA) model, which is well-suited to providing a systematic and non-biased method of investigating a body of literature (Cai et al., 2019; El-Haj et al., 2019; Black et al., 2020; Bentley et al., 2018; Fligstein et al., 2017). El-Haj et al. (2019, p. 266) explain that LDA leads to “wider generalizability, greater objectivity, improved replicability, enhanced statistical power, and scope for identifying ‘hidden’ linguistic features”. Research shows LDA to be a relevant and useful tool for working with both big and small literature corpora (e.g. Li, 2010; Asmussen and Møller, 2019; El-Haj et al., 2019). Asmussen and Møller (2019, p. 16) highlight that applying LDA to even small sets of papers provides “greater reliability than competing exploratory review methods, as the code can be rerun on the same papers, which will provide identical results”.
This analysis is different from previous literature reviews for several reasons. First, we aim to provide an in-depth discussion considering the accounting, auditing and accountability fields. Second, we aim to go beyond the mere bibliometric description of variables such as authors, countries and keywords. For instance, as in Secinaro and Calandra’s (2020) and Zaheer et al.’s (2019) studies, our study offers broad perspectives on past research methodologies to address future research challenges.
Therefore, the authors’ most significant interest derives from the possibility of maintaining blockchain’s inherent characteristics while also maintaining the confidentiality of data resolving a challenging governance issue regarding data privacy. The opportunity of distributed technology and possible applications are applied in different contexts. Particularly, the area of management and strategic business control, including accounting and financial statements, have a higher value (43%). There is also an interest in the supply chain sector that seems to benefit from the technology’s properties. Zemánková (2019)’s analysis reviews the literature on blockchain and AI in accounting, focusing on smart contracts and smart audit procedures, highlighting current applications and tools developed by practitioners. Finally, after 2016, researchers focus mainly on blockchain techniques and smart contracts.
1 Results of LDA analysis
Immutability is a desirable feature for accounting systems because it prevents manipulation, but the way that blockchain achieves this goal is subject to criticism. Indeed, Coyne and McMickle (2017) note that a public accounting blockchain cannot be created because entities do not want to make all their accounting entries public and a private blockchain would not increase assurance because it would not be immutable (O’Leary, 2017). Figure 5 shows a cooccurrence heatmap of the main authors’ keywords (more than five occurrences) in this cluster.
Bitcoin up more than 5% near one-week high
There are signs that the accounting profession is entering a new age of enlightenment with blockchain. Second, the focus on the sustainability of blockchain-related business models in accounting and auditing is not yet developed. The analysis shows that in 20% of the cases, the in-depth analyses concern accounting.
The authors wish to thank Warren Maroun and the two anonymous reviewers for their insightful and constructive suggestions that helped to strengthen our contribution. The authors are also thankful to Filippo Zatti and the research unit Blockchains and Artificial Intelligence for Business, Economics and Law (BABEL) for their expert insights into the complex topic of blockchain technology. Moreover, our SLR allows us to highlight potential future developments related to the use of blockchain for accounting and, more broadly, blockchain in business studies. This area is undeveloped because blockchain is a recent technology, and there are few use cases to study (Pimentel and Boulianne, 2020). According to Karajovic et al. (2019), blockchain for accounting information systems will reach a critical adoption mass within the next three years and will become mainstream in 2025.
Ernst & Young (EY), a leading global professional services firm, utilized blockchain for inventory auditing. They developed a blockchain-based platform to reconcile and verify inventory items for a wine distributor in an efficient, accurate, and tamper-proof manner. The result was reduced audit time and enhanced confidence in financial reporting.