The accounting profession is broadly concerned with the measurement and communication of financial information and the analysis of the information. Much of the profession is concerned with measuring rights and obligations over property or planning how to allocate financial resources.
Using blockchain provides clarity over ownership of assets and existence of obligations and could dramatically improve efficiency. Blockchain can potentially enhance accounting profession by reducing the costs of maintaining and reconciling ledgers and providing absolute certainty over the ownership and history of assets. It can help accountants gain clarity over the available resources and obligations of their organizations and also free up resources to concentrate on planning and valuation rather than record keeping.
Blockchain can lead to more and more transactional level accounting being done but not by accountants. Successful accountants will be those that work on assessing the real economic interpretation of blockchain records, marrying the record to economic reality and valuation.
By eliminating reconciliations, and providing certainty over transaction history, blockchain could also allow for increases in the scope of accounting, bringing more areas into consideration that are presently deemed to difficult or unreliable to measure, such as the value of the data that a company holds.
Implication of Blockchain in Auditing
Blockchain has application in external audit. Performing confirmations of a company’s financial status would be less necessary if some or all of the transactions that underlie that status are visible on blockchain. A Blockchain solution, when combined with appropriate data analytics, could help with the transaction-level assertions involved in an audit and the auditor’s skill would be better spent considering higher level questions. For example, auditing is not just checking the details of whom a transaction was between and the monetary amount, but also how it is recorded and classified. If a transaction credits cash, is this outflow due to cost of sales or expenses or is it paying a creditor or creating an asset. These judgmental elements often require context that is not available to the general public but instead requires knowledge of the business and with blockchain in place, the Auditor will have more time to focus on those questions.
Auditing Use Case
Amongst the many use cases of the impact of the Blockchain technology in Financial accounting, a recent solution was developed for in the auditing part of accounting. At the just concluded National Blockchain Hackathon held in Nile University of Nigeria Abuja where students of higher institutions were made to think out ideas and solutions that could be implemented on the Blockchain, the student team representing Federal University of Technology Akure (FUTA) developed a solution on the blockchain technology called AUDIFY for SMEs and Firms can effectively run their auditing processes at the end of their financial angle. By their research, they discovered that in 2018 $3tn was lost by businesses due to inaccurate auditing processes and to solve these problems, they developed the solution — AUDIFY
Audify is an auditing solution based on three disruptive technologies, Artificial Intelligence and Data Analytics to carry out predictive analysis on the transactions and use it in making decisions in the future about flagging possible fraudulent auditing and Blockchain technology to ensure that the transactions being entered into the database was tamper proof and immutable.
The Future of Accounting
Accountants will not need to be developers with detailed knowledge 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. They also need to be able to act as a bridge, having informed conversations with both technologists and business stakeholders.
Also, smart contracts can result in such things as invoices being paid automatically once receipt of goods has been verified. Audits can be far more automated without having to pour through paper trail documents. Auditors will be able to verify key data underpinning financial statements, thus reducing both cost and time for the payer of the audit. Regulatory compliance can be verified far more efficiently. For these reasons and more, the big accountancy firms are investing in a full exploration of the applications of blockchain. If they can offer their clients greater speed and accuracy, then they will retain the competitive edge. And individual accountants looking for positions within smaller organizations will be far more marketable if they have completed some of the blockchain technology courses that are now being offered by college accountancy programs.
The question of whether Blockchain will take the jobs away from accountants is a big NO!. Whenever a new technology arrives, there is worry about its danger to job-holding individuals who are impacted by it. And there has been some cause for concern in some industries. Consider, for example, the declining role of investment brokers, now that individual consumers have access to all of the data they need to make investment decisions. But while blockchain will certainly disrupt the accounting industry, the task responsibilities of accountants will largely remain intact. However, by adopting blockchain technology, accountants and accountancy firms will be able to offer their employers and their clients the safety and security of all records. And so, the accountant’s role will change, but it will not be eliminated. Information must still be interpreted and categorized correctly before it is entered into the blockchain, and it will fall to the accountant to do this as well as implement and maintain the blockchain.
And how about bookkeepers? Those individuals who must accurately maintain the transaction records? Are their jobs in jeopardy? The answer is again a No. Someone has to oversee accounts receivable; someone has to oversee contracts for payments for goods and services; someone has to prepare invoices; someone has to track income and outflow. Even with blockchain technology, someone has to enter contracts, purchase orders, and payments into those blocks. What this new technology will provide is efficiency, record permanency and transparency, and that is a bookkeeper’s dream
Blockchain technology is already disrupting a number of industries, and it is here to stay. Though in its infancy, its applications will only continue to increase. But will it make accountants irrelevant? No, but it will change the way in which accountants do their work — much like computers have continued to change the ways in which everyone does work.
So, the best thing to do is to embrace this new technology. Get knowledge about it; promote it to clients and potential employers. You don’t need to understand the technicalities of the technology, all you need to understand is how to use it to your employer’s or your clients’ advantage — this keeps you relevant and in demand.