Blockchain Technology and Its Implications for the Accounting Industry

The impact that Digital Technology is having on accounting is not a recent phenomenon with most digital innovations entailing the replacement of analogue instruments with their digital equivalents. However, the Blockchain Technology, which is a more recent innovation, is all set to fundamentally change the accounting process.

Moris Media, a leading Digital Marketing agency based in India, rendering specialised services in more than 40 industrial segments in 40 countries globally, introduces some facts related to the blockchain ecosystem, that are going to have a considerable influence in the way the accounting process is going to be executed in the future.

Direct Co-relation:

While there is much to be written about the operational mechanism of blockchain, accountants should comprehend its fundamental function: keeping a record of financial information and transferring asset ownership in a secure and verifiable way. A distributed ledger forms an integral part of the architecture of blockchain technology that ensures the trust of all parties. This solid cryptographic foundation, when implemented correctly, demonstrates that blockchain can provide almost unbreakable security. The advantages of this technology should be clearly obvious to accountants, even if the underlying technology is somewhat elusive:

·        Automation of the transaction process will ensure that errors that might happen from both sides involved in the process can be eliminated.

·        It will also lead to minimising frauds and a higher confidence in transactions.

·        Transaction security will be enhanced and there will be lesser inaccurate records.

The usage of blockchain in the financial sector is still in the exploratory stage as of now. However, from trends that are being observed by experts in this sector, practically all big financial institutions are investigating how to effectively adopt blockchain technology into their infrastructure, with most technical giants that have been predominantly working for the financial sector already launching a variety of products. Accounting professionals do not yet need to learn every facet of blockchain technology, but it is time to keep an eye on changes inside your organization. There are already some top global MNCs that are making concerted efforts towards bridging technologies for crypto assets, exchanges, and accounting software. Most of the top global retail giants have already adopted blockchain-based supply chains in beta form.

Impact on the Auditing Process:

As an expert in accounting, you are likely counted upon for your talents in maintaining records, ensuring compliance with standards, and navigating complicated legislation and procedures. Due of the reliability of blockchain technology, it is influencing auditing practices.

To have the necessary skill set in the current times and also in the immediate future, it is essential to comprehend how blockchain technology can influence audits. Additionally, accountants with blockchain knowledge may work as consultants, guiding companies through implementation and regulatory challenges associated with blockchain technology. A fact that differs from common perceptions is that the automation of auditing process will actually enable accounting professionals and bookkeepers to further expand their advisory services in order to evaluate findings and educate customers. Moreover, other technologies and services will also be required and subsequently developed.

The new responsibilities that auditors and accountants can foresee for themselves in the immediate future include:

·        Investigating all smart contracts.

·        Being the service order for blockchain systems that are adapted by a business consortium to ensure that necessary controls have been put in the blockchain mechanism.

·        Being the Blockchain service administrator that controls all accesses to the system.

·        Acting as an arbitrator for resolving disputes.

Cryptocurrency is experiencing a strong demand surge:

Cryptocurrency is a complex subject, which has a decentralised structure. This means that accountants will be having to face a number of regulatory challenges. A number of governments have been exhibiting hesitancy to completely accept financial and monetary innovations over which they have little influence. Yet, the widespread and rising usage of cryptocurrencies by enterprises of all kinds requires accountants to be able to interact with customers that invest in or trade cryptocurrency, and a basic grasp of blockchain technology is necessary to comprehend their motives and behaviours.

As a result of the rapidly expanding use of blockchain in financial transactions, there is a significant need to evaluate and comprehend the tax implications of blockchain-related transactions. For this, a new subsidiary industry has already been developed.

Will Blockchain be a substitute for Accountants?

When properly implemented, the blockchain offers a high level of trust, causing some accountants to fear a decline in need for conventional accounting services. However, this new technology will also bring with it a number of new requirements, particularly as it becomes increasingly integrated into conventional banking. Working together with data analytics as well as machine learning, Blockchain will make it possible to automate several repetitive operations, but accountants will still be required to assure accuracy and give the analysis of the data their employers or customers want. Just like any other profession, the accountants are compensated for their skills, which will be required more than ever to evaluate financial data instead of concentrating on basic activities such as balancing and confirming transactions.

Therefore, the need of the hour is that accountants need to acknowledge the fact that Blockchain as a technology is here to stay and they must be ready to adapt themselves to remain at the forefront of their business.