Blockchain’s immutable nature comes from the fact that once a public consensus validates a transaction into the blockchain, it’s virtually impossible to alter or delete the transaction. Matter of fact, one of the things that we’re really proud of was the work we did with AICPA and CPA.com on our stablecoin primer for the accounting professional. To help the accounting profession understand, what’s a commodity token pegged to a barrel of oil? So stablecoins are meant to be pegged to an underlying existing fiat currency or asset.

• Previous empirical studies that have explored the impact of profitability on reporting practices and the adoption of digital solutions have generated diverse outcomes.
• In this article, we will highlight the advantages and disadvantages of blockchain technology in accounting practices.
• On an aggregate basis, mining would represent the seventh largest country by electricity consumption.
• Initially developed to serve the establishment of Bitcoin, major corporations and the AICPA believe that blockchain’s independence, verifiability and distributed ledger methods have the potential to transform international business and economic growth.

Future research should focus on examining the boundary conditions through multi-level analyses. Additionally, cross-validating mixed qualitative perspectives can enhance the interpretability of quantitative findings. Policy interventions should strive to strike a balance between meeting the needs of established enterprises while actively involving smaller entities. The existing literature has shed light on the importance of firm size as a predictor of reporting behaviors and the adoption of digital solutions. However, the complex nature of attribute relationships necessitates a deeper understanding of situational complexities. It aims to provide practical guidance for promoting adoption through digitization.

What are the challenges of applying Blockchain in Accounting?

For example, the “Big Four” accounting firms, including Deloitte, Ernst & Young, PwC, and KPMG, are adopting blockchain to their system. Therefore, the literature highlights the need to investigate attribute synergies within specific contexts while also recognizing the evolving nature of conceptual lenses that incorporate technological transitions. This study emphasizes the importance of empirical exploration that spans corporate responsibility, emerging solutions, and developing economies undergoing digital transformations.

• Some say that they fit in with the existing accounting standards, while others state there is a need to develop a new regulatory framework that will decrease the probability of fraud (Auer, 2019; Pimentel et al., 2019).
• The present study aims to contribute to this field by analyzing the determinants of blockchain adoption in China’s business sustainability accounting environment.
• Through the use of public-key encryption, participants can engage in transactions pseudonymously, safeguarding their true identities with cryptographic addresses [88, 89].
• During an audit, an accounting professional can easily confirm that a transaction happened, but the transaction details aren’t recorded.
• Transactions take time to process and cost money; they are not validated by all parties due to limited network participation, and they are prone to error and vulnerable to hacking.

Here are some facts about the blockchain ecosystem and how it will influence accounting in 2021 and beyond. Accountants will not need to be engineers with detailed knowledge the difference between bookkeeping and accounting of how blockchain works. But they will need to know how to advise on blockchain adoption and consider the impact of blockchain on their businesses and clients.

Customized transaction protocols

Regulatory focus often targets industries with significant environmental impact, such as energy and utilities, although within these classifications, factors can vary significantly [156]. To validate transactions and prevent double-spending in a decentralized ledger, a consensus protocol is necessary. The initial implementation of blockchain utilized a Proof-of-Work protocol, where miners competed to solve cryptographic puzzles and add verified transaction blocks to the chain in exchange for rewards. However, alternative consensus algorithms such as Proof-of-Stake offer improved efficiency while sacrificing a certain degree of decentralization. The consensus mechanism reduces the reliance on centralized validation bodies by establishing network-wide agreement secured through cryptography [15, 91]. Although the middle man slows down transactions and adds fees for their services, they’re not all bad.

Resources

CPAs will need to acquire a working knowledge of the blockchain and smart contracts to navigate in this new triple-entry accounting environment. This emerging and disruptive technology also promises to alter the accounting professional’s perspective, from transaction-focused to analytical. Blockchain is a technology for storing and verifying transactional records that works by adding “blocks” of data to a ledger, called the blockchain, that is maintained across a network of peer-to-peer computers (Coyne and McMickle, 2017). It is a potentially disruptive technology that has begun to have dramatic impacts on the business models and market structures of many industries (Casey and Vigna, 2018), including accounting (Bonsón and Bednárová, 2019; Deloitte, 2016).

Auditors could extend their services to work as accounting blockchain information systems administrators or advisors (Bonyuet, 2020). Auditing procedures and standards will need to keep pace with the new IT environment (Gauthier and Brender, 2021), as new accounting systems will be subject to control testing (Sheldon, 2019). In a cooccurrence analysis of keywords, the relatedness of the entries is based on the number of documents in which the keywords occur together. This analysis included any author keywords that were used in at least five publications.

Blockchain and the future of accountancy

Storing public blockchain data creates a global reference to any piece of information, and it keeps everyone in sync and on the same page as to current state affairs. Even if the company claims to offer transparency or data ownership to its users, the company often is the custodian of the keys of its users, which means they can access and decrypt user data. Also, working with your blockchain network allows the company to alter the records as they control all network nodes, defeating the blockchain’s purpose. However, blockchain cannot replace the traditional auditing process completely. Some limitations will still exist that can limit the benefits obtained from it. On top of that, auditors must use professional scepticism despite the facilities available.

Larger organizations face increased pressure for transparency and visibility from stakeholders, prompting them to proactively implement voluntary transparency measures as a means of reputation management [144, 147, 174]. However, it is essential to recognize that size alone does not guarantee consistency across different contexts due to the interdependencies of attributes [175]. A comprehensive literature review was conducted by systematically searching academic publications since 2023 using relevant keywords. This search was performed across various databases to ensure a wide coverage of relevant sources.

How Will Blockchain Technology Affect the Accounting Industry?

Hence, we also manually reviewed the 15 articles identified in the LDA analysis as the most representative of each topic. This review affirmed the results of the LDA analysis and gave us the opportunity to offer a critique and gain more insights while identifying future research directions. Having companies with cryptocurrencies on their balance sheets also presents some auditing issues because there is not a third party and transactions are pseudoanonymous in some cases. Therefore, the whole auditing process relies on companies’ internal control (Vincent and Wilkins, 2020).

This feature has been the backbone for smart contracts, but its applications in accounting are not to be ignored. Blockchain accounting is in its early stages to predict the exact impact on the accounting industry. However, the positive aspects of blockchain technology will play a major role in transforming traditional accounting.