ACCT6007 Financial Accounting Theory and Practice Assignment Help
Critical Analysis of the Accounting field
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1. Explain the three phases of blockchain technology? What is the potential use of blockchain technology in accounting?
Ans. According to Iansiti& Lakhani(2017), blockchain refers to a list of records called blocks that are linked using cryptography. Blockchain was invented by Satoshi Nakamoto in the year 2008 to facilitate an ease to the public transaction ledger of the cryptocurrency bitcoin.
According to Zheng, et. al, (2018), this made blockchain the first digital currency which could be used without the need of a central server. The blocks on the blockchain are made up of Digital information which comprises of information of the latest transactions including their date, nature of transaction time and amount of purchase. These blocks store information about the participants of the transactions and each block stores different information from the other block. In this share economy, blockchain has become a fast-disruptive technology gaining attention from many researchers. There are particularly three development stages of blockchain. The first one being the analysis phase where the requirements of the blockchain application is collected for its development. The users or assets can either be physical or virtual. The next stage is the design phase where the attributes of the entities or parties involved are identified. The constraints and dependencies are also captured in the design phase. The final stage is the implementation phase where the smart contract for the blockchain applications are implemented. The smart contract comprises of functions, variables, and modifiers.
According toSchmitz & Leoni(2019), blockchain technology can be immensely useful in accounting and businesses that utilize accounting. The use of blockchain technology is an efficient measure for better entity risk management and streamlining the internal processes of the business. The implementation of blockchain in to accounting profession is usually labor intensive due to reduction in operating costs. The advantages of blockchain technology can be utilized efficiently by auditors as they can gain access to data without the fear of data alteration and eliminating the burden of time-consuming audit processes. Blockchain in the accounting profession will reduce the risk of possible errors while reconciliation of books of accounts and help in completing an audit without wasting crucial time. This also benefits the clients as they are able to reduce money and time in audit testing. As blockchain reduces the risk of fraudulent activities, the risk of increasing threat of Cyberattacks and hacking also gets reduced. In the current scenario, companies are adopting blockchain technology to secure their database but still the technology is relatively in its infancy stage.
2. In your own words explain your understanding of Triple Entry Accounting.
Ans. According to Taylor (2017), triple entry accounting has the potential to revolutionize many industries. It is often considered as an alternative to traditional accounting with a third feature added as per the global standard of debit and credit. Double entry accounting has been prevalent from ages but required a more simplified method to manage the business finances which gave rise to the concept of Triple Entry accounting. According to Dai&Vasarhelyi (2017), the concept was coined by late professor Yuji Ijiri as an enhancement to the traditional accounting system. This concept explains that the process of accounting may enable better strategic decision making. The triple entry accounting cryptographically seals all accounting entries involving outside clients through a third party. The accounting entries are related to purchases of inventory and supplies, tax, payments, sales and other expenses. Generally, in double entry book-keeping, the cash received is debited and the cash expenses are credited. However, in the case of triple entry accounting, blockchain comes into existence where all the accounting entries are recorded separately in independent set of books of accounts. As identified byLi (2017), falsification of these accounting records will be difficult as they would be distributed and cryptographically sealed as well as digitally signed.It is almost impossible to destroy these accounting records making a stronger governance possible that would have a positive impact on the future corporate accounting needs.
The cryptographic invention of the digital signature provides concrete evidence to the receipt regardless of the presence or absence of the receipt. However, as identified by Chuen(2015),in the year 2008, Bitcoin was invented which is a decentralized digital currency without a central administrator or bank. The introduction of triple entry accounting and Blockchain has reduced the efforts on multiple audits and there is a control-based approach through the Blockchain. The power of triple entry accounting leads to the benefit of minimizing the alteration of transactions and the transactions a permanent on the blockchain. The reduction of security threats is also minimized due to the decentralized administration. The use of highest level of encryption technology ensures the safety of transactions thereby reaching widespread adoption.The adoption of such a method will act as a vaccine to the fraudulent transactions and scams undertaken to cause considerable damage to accounting records.
3. Do you agree or disagree with any arguments made by the author? Explain your point of view and provide evidence in support of your point of views from other academic resources.
Ans. According to Atzori(2015), blockchain technology has the potential to uplift many industries and specially the financial sector as it has started evolving in the recent years. The use of blockchain technology is still in its experimental phase as not many companies apart from the big names in the financial utilize this technology efficiently. The current state of accounting technology still in its infancy stage when compared to other industries. The financial sector has been comparatively slow to adopt digitization which has immense potential to transform the entire sector. The use of double entry bookkeeping has been a game changer in the field of financial accounting. However, it can be difficult for auditors to verify each and every information about the financial information of other companies and therefore each audit can be a costly exercise and time consuming. This is where blockchain technology comes into existence and has immensely helped the accounting profession to keep separate records based on transaction receipts by creating an interlocking system of accounting records. Since the transactions are distributed and cryptographically sealed, the occurrence of fraudulent activities destroying of data is nearly impossible. According to Brandon (2016) many authors have suggested a plethora of benefits for accounting professionals like auditors as this would allowed them to add more value to their profession. Blockchain has made it possible to prove integrity of electronic files and therefore several companies have bestowed their trust upon this technology. Blockchain in the future is considered to reduce reconciliations and expand the areas of technology and advisory. Since the technology is still in its infancy stage in the financial sector, the accuracy all existence of blockchain transactions with external sources still needs to be confirmed. It is also important to pay attention the way of recording transactions and recognizing financial statements. In the future, more and more companies and individual auditors blockchains and will likely lead a way for unprecedented services.
4. Comment on any potential issues or problems with blockchain technology being used in accounting?
Ans. Blockchain is an accounting technology that is concerned with maintaining better financial information and transfer of ownership of assets. The use of blockchain in accounting profession clarity of maintaining accurate information and improve efficiency to a significant level since it minimizes the cost of maintaining and reconciling ledgers, accounting professionals utilize blockchain efficiently. However, blockchain is a fast-disruptive technology can be threatening for accountants working in the area of bookkeeping and managing reconciliation work. As opined by Coyne&McMickle(2017), the replacement of accountants but blockchain can be utilized to focus on more important areas. Blockchain offers many opportunities for the accountancy profession and can be utilize efficiently for gaining better opportunities in the future. Although accountants are participating in understanding the area of blockchain, there is a lot more to do in the accounting profession. This is due to lack of knowledge and information about blockchain which can bring the expertise of accountants to that work. This will allow Accountants to work as advisers to companies and help them look for better opportunities. However, the use of blockchain in accounting companies and for auditors can rise questions such as need for auditing the blockchain itself. Also, there can be questions related to effectiveness of the blockchain as an audit evidence to reduce risk assessment and testing procedures.
Nevertheless, the risk of losing jobs lingers among the accounting professionals which has been shown as a concern in some industries. For instance, it is easier for individuals to make investment decisions without the help of investment brokers which can be threatening for these accounting professionals. Whenever a new technology arrives, professionals of any area or industry will worry about the danger of losing their jobs and this can have major impact on them. However, the positive side of adopting blockchain in to accounting profession is that it will allow professionals to learn the new technology and improve their area of expertise
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