Features of Using Blockchain Technology in Accounting Nadiia Lobanchykova1, Tetiana Vakaliuk1, 2, 3, Dmytro Zakharov1, Vitalii Levkivskyi1, and Viacheslav Osadchyi2, 4 1 Zhytomyr Polytechnic State University, 103 Chudnivsyka str., Zhytomyr, 10005, Ukraine 2 Institute for Digitalisation of Education of the NAES of Ukraine, 9 M. Berlynskoho str., Kyiv, 04060, Ukraine 3 Kryvyi Rih State Pedagogical University, 54 Gagarin ave., Kryvyi Rih, 50086, Ukraine 4 Borys Grinchenko Kyiv Metropolitan University, 18/2 Bulvarno-Kudriavska str, Kyiv, 04053, Ukraine Abstract The article considers theoretical provisions and practical recommendations on the peculiarities of the application of blockchain technology in accounting, in particular, the concept of blockchain technology and possibilities of implementing blockchain technology in the accounting system are considered, practical solutions for the implementation of blockchain technology in accounting and audit are proposed; the impact of blockchain technology on the organization of accounting is determined. The advantages, disadvantages, and promising directions of research on the implementation of blockchain technology in accounting are identified. Keywords 1 Blockchain, network, cryptocurrency, smart contract, accounting, distributed network. 1. Introduction records that can change the way accounting and auditing are conducted. Blockchain solutions can In recent years, blockchain technology has improve collaboration between stakeholders become one of the most researched and and reduce the cost of transactions, as well as interesting areas of innovative development. allow for the creation of complex financial However, the emergence of new technology and instruments based on smart contracts. From a an attempt to apply it in the activities of stakeholder perspective, blockchain can enable enterprises require the modernization of the more reliable auditing of financial statements, accounting system. The practical experience of detection of fraud, and greater confidence in the implementing blockchain solutions for accuracy of information [3, 4]. accounting and auditing demonstrates the The prospects for implementing blockchain complexity of regulatory regulation in this area. in accounting and auditing are broad. They However, increased competition and global include automation of accounting processes, in market dynamics are forcing companies to pay particular through smart contracts, attention to new technologies and consider their simplification of internal and external control, application, which requires the formation of a increased information availability, and the ability clear regulatory position about such to verify data in real-time. Therefore, research on technologies [1, 2]. the peculiarities of using blockchain technologies The relevance and prospects for the in accounting is relevant. implementation of blockchain technology in The purpose of the study is to substantiate the accounting and auditing in the modern world are theoretical provisions and develop practical discussed both in scientific research and in the recommendations on the specifics of using corporate environment. A blockchain, or chain of blockchain technology in accounting. blocks, creates an extremely reliable system of DECaT’2024: Digital Economy Concepts and Technologies, April 4, 2024, Kyiv, Ukraine EMAIL: lobanchikovanadia@gmail.com (N. Lobanchykova); tetianavakaliuk@gmail.com (T. Vakaliuk); dima.zakharov@ztu.edu.ua (D. Zakharov); Levkivskyy@ztu.edu.ua (V. Levkivskyi); v.osadchyi@kubg.edu.ua (V. Osadchyi) ORCID: 0000-0003-4010-0308 (N. Lobanchykova); 0000-0001-6825-4697 (T. Vakaliuk); 0000-0003-3423-0093 (D. Zakharov); 0000- 0002-1643-0895 (V. Levkivskyi); 0000-0001-5659-4774 (V. Osadchyi) ©️ 2024 Copyright for this paper by its authors. Use permitted under Creative Commons License Attribution 4.0 International (CC BY 4.0). CEUR Workshop Proceedings (CEUR-WS.org) CEUR ceur-ws.org Workshop ISSN 1613-0073 Proceedings 48 2. Theoretical Background simultaneously and entries are recorded in all ledgers at all times. These changes are saved The current state, prospects, and possibilities into blocks that create a chain where the block of applying blockchain technology in is linked to the previous one by storing its hash accounting are disclosed in the works of many (unique data displayed from a given block). scientists. The basic concepts of blockchain Fig. 1 shows the fundamental chain were introduced by Satoshi Nakamoto in architecture of the blockchain network. Bitcoin [5]. He proposed a distributed ledger Except for the first block (genesis block), technology that tracks and maintains a each block has its hash as a unique identifier tamper-proof record of transactions in a that includes the previous block’s hash. This decentralized network. Essentially, it is a creates a chronological chain. In addition, the unique database system that is created, hashing mechanism provides increased data replicated, synchronized, and maintained by security. Typically, a block stores a set of all participants in a decentralized network. transactions with time stamps that Blockchain operates in a decentralized peer- stakeholders in the network confirm. Once a to-peer network to verify and store all consensus is reached, the block is accepted and transactions in a consensus agreed by all nodes stored by all parties in the blockchain and in the network, without any central authority cannot be changed. Thus, the trust and to verify the transaction (as in the case of an transparency of transactions between intermediary). All completed and confirmed companies have significantly improved. transactions are recorded on the distributed Blockchain technology has many unique ledger in a verifiable, secure, and transparent features that allow for the creation of a manner, along with a timestamp and other verifiable, secure, transparent, and immutable details. In this way, the exchange of tangible distributed ledger, the main characteristics of and intangible data and assets between which are summarised as follows: participants can be digitally recorded. Each 1. Universal exchange of values: Blockchain stakeholder maintains a copy of the provides a secure and efficient platform synchronized ledger, preventing a single point for recording transactions regarding of system failure or data loss. When changes intellectual property rights, provenance are made, such as the addition of a new block, of services and goods, ownership of all copies on the network are updated assets, cryptocurrency exchange, etc. Figure 1: Blockchain network architecture [6] 2. Distributed governance: the blockchain provides secure and verified data for all network is not controlled by any network participants. Thus, the entire flow authorized body, organization, or person, of transactions is fully transparent, and and the need for trusted intermediaries to assets and data can be transferred verify transactions is eliminated. It is a between multiple companies quickly and distributed database that simultaneously efficiently. 49 3. Decentralized architecture: the ledger is consensus and saved in the chain, the decentralized and stored in all nodes (i.e. recorded data cannot be changed. in separate stakeholder databases) of the 7. Improved data security: blockchain network, and its failure at a central point of technology uses asymmetric cryptography the infrastructure is impossible. Thus, it and digital signature algorithms to ensure contributes to a reliable network that data security and individual identification. improves the quality, reliability, and A typical permissioned blockchain follows a availability of services and information. similar data flow as shown in Fig. 2, where a 4. Logically centralized: A blockchain signature is attached to the transaction, which network behaves as a logically centralized is then sent or broadcast to the network and system with only one transaction record added to the block. Once the block is verified, that all participants share. the transaction is permanently stored in the 5. Data transparency: blockchain technology chain. A permission blockchain differs from a allows you to create a highly transparent permissionless blockchain in how blocks and network that all stakeholders can see transactions are verified. To improve anytime. This significantly reduces the performance and reduce latency, most likelihood of illegal transactions. permissioned blockchain networks deploy 6. Immutable data: once a block with a set of efficient consensus protocols that nodes use transactions has been verified by for verification. Figure 2: Data movement in the blockchain network [7] Many blockchain platforms have different blockchain technology. For example, Deloitte, consensus algorithms, development tools, and EY, KPMG, and PwC have led the initiative to programming languages. integrate blockchain into their business to Accountancy professional bodies, namely meet clients’ changing needs for blockchain the ICAEW, the Association of Chartered transactions [8]. Accordingly, Deloitte created Certified Accountants (ACCA), the Chartered its Rubix division and launched a plug-and- Institute of Management Accountants (CIMA), play blockchain product [9]; EY introduced a the Chartered Institute of Public Finance and blockchain analyzer platform to support audit Accountancy (CIPFA), and the International team data reconciliation; PwC released Federation of Accountants (IFAC), all cryptocurrency audit software and updated its published reports on their websites relating to Halo audit tool; and KPMG is partnering with 50 Guardtime, Microsoft, R3, and Tomia to create Polkadot (No. 11) received $145 million in blockchain-based services [10]. investment, and DAO received $143 million The blockchain economy is closely related from sponsors. to such concepts as tokenization, ICO (Initial Table 1 shows the structure of ICO projects Coin Offering), and smart contracts. The use of by application area; as you can see, most of these elements will drive changes in the them were related to blockchain infrastructure existing economic system. Tokenization is the development. conversion of a physical asset into a digital Table 1 format. This allows the owner to manage the Types of the largest ISO projects [11] asset directly rather than resorting to Name of Amount of intermediaries or third parties. Technically, № Project type the ISO investment tokenization is available for any asset or 1 EOS $4.1 billion Smart Contracts intellectual property and knowledge of an 2 Telegram $1.7 billion Encrypted Messaging & individual. Using tokens aims to provide most Blockchain Ecosystem business processes with transparency, speed, 3 Dragon $320 million Decentralized Currency accessibility, and cost reduction. for Casinos Many people believe that cryptocurrency 4 Huobi $300 million Cryptocurrency Exchange and tokens are identical concepts. They are 5 Hdac $258 million IoT Contract & similar but not equivalent. Tokens differ from Payment Platform 6 Filecoin $257 million Decentralized Cloud cryptocurrencies in the following key ways: Storage • Are issued by a private company or 7 Tezos $232 million Self-Amending organization. Distributed Ledger 8 Sirin Labs $158 million Open-Source • Are not used for payment on other Blockchain Smartphone platforms. 9 Bancor $153 million Prediction Markets • Do not replace fiat money. 10 The DAO $152 million Decentralized VC • Cannot be obtained through mining. Tokenization is the basis of an ICO or initial Another element related to blockchain coin offering. To obtain investment for a technologies is smart contracts, which are project, tokens that give investors rights to a essentially algorithms that perform service or product are sold. ICOs are an conditional actions: if action x occurs, then excellent way for startups to get funding action y is performed. Smart contracts allow without venture capital. In return for the you to automate processes and ensure the investment, founders do not need to transfer fulfillment of previously established any of their shares in the company to third agreements. The terms and conditions set out parties. At the same time, investors can be in a smart contract must be changed or professionals and ordinary people. Without an enforced. Such contracts have various uses, ICO, they would likely be unable to invest in the such as elections, trade, and taxation. project. The fulfillment of a smart contract depends The ICO process is similar to crowdfunding. on compliance with the terms and conditions However, while fans receive products or just specified in it. For example, the rights to the pleasant bonuses in exchange for their sold property are transferred automatically investments in the latter, the value of tokens only after the owner receives the amount purchased at an ICO can increase tenfold over specified in the contract. The security of such time. That is why these coins are often bought contracts is ensured by storing them in a for further speculation rather than to use the decentralized registry in an encrypted form, rights to the product. but only if no errors are made in creating smart Singapore hosted the fourth largest ICO, contracts. Huobi, which raised $300 million. Elsewhere, Blockchain technologies may become the Switzerland hosted six investment projects in backbone of the economy in the future. the top 15 campaigns. HDAC (No. 5) raised Creating a decentralized financial system that $258 million, Tezos (No. 7) brought in $232 intermediaries, commissions, the state, and million, Sirin Labs (No. 8) received $158 corruption cannot influence is possible. million, Bancor (No. 9) brought in $153 million, However, in practice, building such a system 51 will be a challenge. Banks and corporations are • High volatility of cryptocurrencies, now developing solutions based on blockchain attracts speculators to the industry and technologies themselves. For example, Google causes dissatisfaction among regulators. is working on a blockchain to improve the • Lack of understanding or interest in security and reliability of user data. The technology, and development is possible Alibaba Group conglomerate is actively only with the participation of all working in blockchain technologies, and two stakeholders. subsidiaries have even been set up to develop • Impossibility of implementing the tasks software and study blockchain in supply chains set in a short time without the help of [12]. Banks are also implementing blockchain states and banks. solutions to organize and conduct their • High level of fraud in the ICO sector, business. For example, the British Barclays has which may lead to a ban on the use of this joined the blockchain consortium founded by method of attracting investments. CLS Group, where participants are working to • The use of cryptocurrencies as a savings create a decentralized competitor to the global or speculative asset should become the SWIFT payment system for fast and secure new money of the blockchain economy. transfers [13]. In 2017, 12 Chinese banks, For systemic economic processes, blockchain including state-owned ones, integrated technology is a way to switch to a decentralized, blockchain solutions. In 2018, the Spanish transparent system and reduce the bureaucracy bank Banco Bilbao Vizcaya Argentaria (BBVA) associated with control regulations. Blockchain issued the world’s first loan using a private technologies can be used to build a new financial blockchain [1]. system and eliminate transaction intermediaries. The use of blockchain technologies can be 3. Results considered not only at the macro and mega levels. Blockchain technologies will help The analysis suggests that if states and banks optimize and improve many processes at the continue to create and integrate solutions micro level. For example, a company can build a based on blockchain technologies, the current motivation system based on blockchain. To do system will change but will not become this, develop a DApp solution (Decentralised decentralized and independent. application) and add a token with the necessary Ideally, the formation of a blockchain functions and characteristics. Tokens are not a economy will lead to: currency because they have value only within the • Reduction of corruption and bureaucracy. company. • Development and implementation of Nevertheless, the management system innovative management methods. allows the company to set the rate. The token • Ensuring transparency of transactions. has an actual monetary basis, allowing • Simplifying and reducing the cost of managers to control employee distribution financial transactions at the international easily. The rate depends on the business’s and local levels. success, so tokens cross between money and shares. When an employee receives such a • Creation of a global independent token, he or she has a different attitude to cryptocurrency. implementing the plan. If successful, both he or • Creating opportunities for business she and the company will benefit as the token’s investment for everyone. value increases. The versatility of blockchain • Liberation from the control of the technologies allows you to attach any object to centralized banking system. a token—glasses, goods, services, or a voice. • Introduction of a secure transaction This principle is a form of non-financial staff system based on smart contracts. motivation, which implies a specific list of The factors that hinder the development of benefits that employees demand. the blockchain economy may include: The use of such a system offers significant • Lack of a well-developed regulatory advantages. First of all, blockchain system—the industry, even in developed technologies have advantages over banking countries, suffers from legislative systems: the continuity of the system ensures uncertainty. 52 that any transaction is completed in the in a distributed public register that belongs to shortest possible time, without failures, no one and can be used by anyone. breaks, or days off. Employees can freely Legislation requires mandatory publication dispose of their earned tokens. However, the of financial statements (for joint-stock main advantage of a blockchain-based companies, banks, insurance companies, and incentive system is a significant increase in enterprises of public importance). Regular KPIs (key performance indicators). Everyone disclosure of financial statements is required, will want to test the new system with their including balance sheets, income statements, hands, and getting the coveted tokens directly cash flow statements, statements of equity, and depends on the quality of work. To prove notes to the financial statements. To maximize themselves positively, employees will start their interests, management may mislead users generating new ideas and increasing their of information by manipulating accruals, productivity in the workplace. The bonuses structuring transactions, and disclosing false and benefits program should consider their information. The reliability of the published different needs and be flexible to ensure that financial statements and notes is, to a certain employees are properly motivated. Within an extent, guaranteed after the audit. However, individually set limit, each employee chooses third-party users of the information cannot get the benefits they like from a general list. A acquainted with the “real” transactions and distinctive feature of the solution is the accounting processes of the company. Users decentralized setting of limits: specific cannot obtain a complete, accurate, and timely categories of employees do not automatically understanding of a company’s financial receive the same limits; they are set position, operating performance, and cash flows individually for each employee, according to by reviewing the financial statements alone. their performance. More flourishing and The blockchain records and verifies efficient work gives the employee more tokens information in a decentralized way. The in the virtual wallet and, accordingly, access to process does not require authoritative more rewards. It is important to note that the intermediaries, and blockchain technology company’s position or length of service does ensures the information is transparent, secure, not play a role, as every employee can prove and protected from interference. As a result, themselves in their work. The coefficient of blockchain has a great potential to increase token accrual depends on the quality of the trust between market participants [15], which, work performed, and the evaluation criteria in turn, the use of blockchain technology in are prescribed in advance in a publicly financial accounting has the potential to make available document. the accounting process of firms transparent, This incentive system has several improve the quality of external reporting interesting aspects. Firstly, there is a currency information and effectively reduce information exchange rate. Its direct dependence on net asymmetry between firms and external profit will stimulate better teamwork. For investors. example, the quality of communication The application of blockchain technology in between departments will improve accounting includes two aspects. On the one significantly, as the conclusion of a deal may hand, listed companies disclose accounting depend on the timely receipt of the information on the blockchain. Companies information. Secondly, the token accrual rate publish source documents of transactions and will significantly increase the quality of work events and add payment fees and accounting performed. Thirdly, the use of smart contracts policies and methods embodied in smart will make the whole process more transparent: contracts to the accounting blockchain. Once no one will be able to doubt the fairness of the the smart contract is set up, if the firm chooses token accrual. to change it, all changes will be tracked on the Despite legislative obstacles, blockchain blockchain. technologies are gradually being introduced On the other hand, as blockchain nodes, into production processes and social life, various stakeholders will engage in forcing the avoidance of outdated technologies. competitive mining and promptly record and Their revolutionary and explosive nature and, verify the information submitted by the at the same time, their adverse side are hidden enterprise in a new block and then transmit it 53 to the blockchain network. Institutional informed decisions. In addition, even investors with technical and financial disclosing publicly available information via advantages are more likely to become blockchain has many positive effects. blockchain nodes, as, in addition to the On the one hand, historical information has a rewards of mining blocks, they are also specific reciprocal value. Especially in the case motivated by an information advantage with of significant uncertainty, investors will verify early access to corporate information. In the available information by reviewing addition, counterparties such as auditors and historical information. On the other hand, the lawyers are also likely to become nodes on the disclosure of publicly available information blockchain. Auditors can check source through official channels can influence documents and intelligent contracts published investors’ decision-making. by a firm and issue their audit opinion on the In the long run, as firms and investors blockchain. Finally, regulators and stock recognize that voluntary blockchain disclosure exchanges will also become essential nodes in is a high-quality signaling mechanism to reduce the accounting blockchain to perform their transaction costs, more and more companies monitoring functions better. will choose to make voluntary blockchain While firms must apply accounting methods disclosures after balancing the benefits and prescribed by accounting standards for costs. However, as more information is recording, presenting, and disclosing disclosed on the blockchain, comparability of information in traditional accounting, they still information will become an issue. Regulators have discretion over accounting methods, such may require a standardization of information to as accounting policies, estimates, and improve comparability. judgments. Listed companies only provide Anticipating that blockchain technology can regular financial reports to the market but do increase the authenticity, accuracy, and not disclose the accounting procedures used to comparability of disclosures and reduce prepare the reports. While this institutional corporate earnings management; regulators arrangement can protect firms’ confidential may even use blockchain as the primary information, there are also several negative platform for mandatory disclosure. The consequences. First, the risk of falsification and content of mandatory disclosure will be source corruption of transactions exists regardless of documents of transactions and events, as well whether a company uses a paper or electronic as accounting policies and methods embodied ledger. Secondly, managers or controlling in smart contracts. Such information should be shareholders of listed companies may disclosed in real time based on current data. manipulate or create transactions to maximize Other non-confidential information, such as their interests. Since the accounting process is earnings forecasts, corporate social not transparent, it is tough for external responsibility reports, and business reviews, information users to detect problems. Finally, which are typical content companies would even if external auditing exists, auditors may like to disclose voluntarily in the short term, not be able to detect all instances of fraud and should also be disclosed on the blockchain. error in the firm or may lack the independence However, the frequency of disclosure should to report problems to the market. be at the discretion of firms. If firms want to As noted above, the technical make a good impression in the market, they characteristics of the blockchain make the will be incentivized to disclose non- disclosed information very transparent, confidential information promptly. traceable, and protected from unauthorized Anticipating that blockchain technology can access. Voluntary disclosure via blockchain is a increase the authenticity, accuracy, and beautiful way for companies that want to comparability of disclosures and reduce reduce information asymmetry with investors. corporate earnings management; regulators In the short term, firms can disclose valuable may even use blockchain as the primary but non-mandatory information via the platform for mandatory disclosure. The blockchain, such as earnings forecasts and content of mandatory disclosure will be source corporate social responsibility reports. In this documents of transactions and events, as well way, self-disclosure helps investors better as accounting policies and methods embodied understand the business and make more in smart contracts. Such information should be 54 disclosed in real time based on current data. such circumstances, the focus of auditors will Other non-confidential information, such as shift from preventing material misstatements earnings forecasts, corporate social to analyzing the reasonableness and reliability responsibility reports, and business reviews, of the auditee’s activities. which are typical content companies would The accounting blockchain has other like to disclose voluntarily in the short term, threats if applied in the long term. These should also be disclosed on the blockchain. include the shifting of accountants’ However, the frequency of disclosure should responsibilities, the problem of information be at the discretion of firms. If firms want to privacy for firms, and the growing complexity make a good impression in the market, they of regulation. Blockchain technology could will have an incentive to disclose non- automate the recognition, measurement, confidential information promptly. presentation, and disclosure of information, In summary, compared to traditional replacing the position of traditional financial financial reporting methods, blockchain accountants in the long run. This reduces the technology in financial accounting has scope of traditional accounting tasks, such as advantages such as high transparency, recording and preparing financial statements, traceability, timeliness, and protection against but creates more jobs to ensure the forgery. In addition, smart contracts can authenticity of source documents and the automate financial reporting, which can validity of smart contracts. This is a new significantly reduce financial accounting costs challenge for accountants. and improve the timeliness, reliability, and In addition, the issue of information privacy comparability of information. In addition, it can in the short term only affects the amount of also reduce errors in disclosures and earnings information that firms voluntarily disclose on management so that financial statements can the blockchain. However, in the long term, fairly and accurately reflect the firm’s financial radical changes in the automation of financial position and operating performance. reporting will significantly increase Accordingly, the problem of asymmetric companies’ out-of-pocket costs, which will information can be mitigated. However, due to likely hinder the application. the existing shortcomings of blockchain There is also the problem of increasing technology, the above benefits will take time to regulatory complexity. Due to the diversity and become a reality. With the development of anonymity of nodes, speculators can take blockchain technology, blockchain accounting, advantage of the mining right to post “useful” and financial reporting will become a viable and information to make a one-time profit. Even attractive option in the long run. false information can be detected quickly, and In the long run, using blockchain technology it is difficult to identify the speculator who in financial accounting has two main posted the false information. In addition, the implications. On the one hand, the raw data presence of the “51% attack” also makes published in the blockchain is tamper-proof. On regulation difficult. While it is difficult to have the other hand, smart contracts allow for more than 51% of the blockchain’s computing automated accounting and reporting, which power, there is a possibility of collusion. helps to track business activities. These changes Regulators cannot deter this action if it does will make it more difficult for companies to occur. One possible solution is to use a manipulate accounting data, but this does not permissioned blockchain instead of a public mean that using blockchain in financial reporting blockchain. The basic idea of a permissioned can eliminate fraud. While the potential benefits blockchain is that one central organization are large enough, firms still have incentives to controls who has the right to read and write cheat by falsifying source data. new information on the blockchain. This can As a result, one of the potential threats of partially solve the problem of information blockchain adoption in financial accounting is privacy and the growing complexity of that businesses may turn to creating regulation. However, it would weaken the transactions to obtain desired accounting fundamental characteristics of blockchain metrics. In terms of auditing, this change technology, which are decentralized and means that the control risk in audit risk will immutable. decrease while internal risk may increase. In 55 Financial accountants’ responsibilities will blockchain with other forms of technology, shift from recording transactions and such as AI, IoT, or cloud computing. We look at preparing financial statements to ensuring the blockchain technology as a factor in increasing authenticity of source documents and the transparency and trust in accounting and how validity of smart contracts used in the professionals can improve decision-making by accounting blockchain. Other threats, leveraging blockchain’s ability to provide including the confidentiality of firms’ immutable and verifiable data. The main information and the increasing complexity of characteristics of blockchain technology are regulation, could pose a barrier to the transparency, decentralization, immutability, application. One possible solution to address tamper resistance, strong authentication, these concerns is to use a consortium synchronized networks, and consensus. In blockchain instead of a public blockchain, other words, blockchain technology allows the which would correspondingly weaken transfer of anything of value, not only financial blockchain technology’s fundamental transactions but also assets such as intellectual characteristics. In general, blockchain in property, health data, voices, and ideas. financial accounting has both opportunities Blockchain technology affects the database and threats. Moreover, when the technology mechanism of an Accounting Information becomes sufficiently mature, it will likely bring System (AIS) by digitizing current paper-based fundamental changes to financial accounting checks. The technology can securely store and auditing, even to entire financial markets. accounting data such as accounts payable and The practice of implementing receivable and can improve the efficiency of blockchain technology in accounting and transaction accounting. Deloitte identifies auditing. The digitization of companies’ ways blockchain technology can solve current systems has allowed them to apply new accounting problems[17]. It can simplify technological tools to simplify business transactions, reduce settlement time and processes and transform business models to counterparty risk, minimize fraud, and innovate in their operations, as they can access improve regulation and capital liquidity [17]. advanced computing power and large The primary purpose of using blockchain databases. Academics, social media, industries, technology for accounting is to create trust and and governments spend much time on digital a trust network, with or without a trusted technology: blockchain, Artificial Intelligence party. Blockchain collects verified information (AI), big data, the Internet of Things (IoT), and about the transaction amount, to whom and by cloud computing. These innovations are whom it was paid, then hashes and adds the significantly transforming businesses and block to the existing chain. Combining hash individuals, with blockchain providing the algorithms, private and public keys, and foundation for a “value internet” that will decentralized ledgers makes blockchain fundamentally change society and its powerful in modern internet usage. Its businesses. Since Nakamoto [5] laid the immutability, traceability, and visibility allow groundwork for what became blockchain participants to view fully encrypted, technology in 2008, the banking, finance, synchronized transactions. The distributed insurance, education, and government sectors network [18], digital signatures, and have used blockchain technology to the point consensus verification rules make blockchain where 10% of global GDP will be recorded and safe and secure. According to the Financial stored on blockchain by 2027 [16]. Accounting Standards Board, the trust derived PricewaterhouseCoopers (PwC) estimates that from blockchain comes from records being blockchain could increase global GDP by USD tamper-resistant and unalterable due to their 1.76 trillion by 2030 [10]. distribution and hashing. Like fingerprints, Deloitte’s 2020 Global Blockchain Survey hashes are unique because every change, no shows that companies are more committed matter how minor, when information is added than ever to embedding blockchain in their causes the hash to change from one unique business. As blockchain matures, innovators identifier to another, as such changes mean are discovering new opportunities to create that its block is no longer the same. value and increase trust and resilience to Blockchain is a cutting-edge technology that digital transformation by combining can transform invoicing, payment processing, 56 contracts, and documentation. While cash, through multi-party verifiable records [23]. A receivables, payables, and inventory are triple-entry accounting system is also already updated in ERP systems, such records available, which adds a third level of records are centralized and lack multi-party called “credit” to explain additional income to verification. Blockchain allows encrypted current debit and credit records. The transactions that benefit from multi-party difference between triple-entry and double- verification to be publicly displayed, thus entry accounting is that digitally signed enabling companies to provide real-time receipts are added and shared by each agent to balance sheets, income statements, cash provide substantial evidence by sharing statements, inventory records, and capital records where the digitally signed receipt is investment information relating to individual the third transaction, thus ensuring the counterparties, customers, auditors, and credibility and transparency of the records. regulators along the value chain. Because Triple-entry bookkeeping can also follow an blockchain allows for the instant exchange of independent and secure template to increase critical information, it can create a transparent, the reliability of financial reporting, thus real-time, verifiable accounting ecosystem increasingly enabling the exchange of financial where managers, accountants, counterparties, information with blockchain participants. This and investors can collaborate to verify shared ledger can automate data reconciliation transactions and provide reliable evidence for to simplify the procedure and provide greater multi-party verification. Blockchain-enabled confidence in decision-making. The reliable real-time accounting will significantly reduce presentation of financial statements can be opportunistic behavior by managers to engage improved with shared data from independent in accounting tricks and disruptive activities to companies, a transparent system, and the manipulate reported earnings. This is because immutable, open-access storage provided by such accounting can allow participants to blockchain. Of course, different businesses will instantly identify suspicious asset transfers have different needs for triple-entry systems. and other transactions that may pose a conflict For example, banks have legal requirements to of interest. track individual transactions, while other There are some studies and proposals on businesses have more general requirements. using blockchain to publish and verify The design of triple-entry systems should be information in real time. Using real-time aligned with the goal of a long-term business accounting data recorded in blockchains is strategy. proposed to inform real-time audit and Blockchain is changing the approaches and reporting procedures [19]. J. Sogaard has tools for auditing. Traditional audit methods implemented real-time Value-Added Tax must be revised to meet businesses’ current (VAT) calculation using real-time accounting and future needs in the digital economy. information recorded through blockchain Continuous auditing means using advanced technology [20]. Financial institutions can now technologies to automate audit activities provide real-time services to ensure that every continuously to test controls, analyze risks, calculation is reliable. For example, Ripple [21] identify exceptions or anomalies, analyze offers more accessible and faster cross-border patterns, and view trends. It is likely to move payments using blockchains on global towards integrating artificial intelligence and networks. Blockchain will not replace the XBRL blockchain to form a coherent ecosystem to standard; it will be more effective if XBRL improve assurance. Deloitte, Ernst & Young, provides high-quality structured data. XBRL PwC, and KPMG report that they plan to use AI combined with blockchain can enable real- in audit planning, risk assessment, transaction time reporting and accounting [22]. testing, analytics, and audit work papers to Some new initiatives that use blockchain reap the benefits of time savings, faster data are related to triple-entry bookkeeping. Triple- analysis, increased accuracy, more profound entry bookkeeping using blockchain knowledge, and better client service. “The Big technology creates a shared ledger (journal of Four are committed to using artificial records) that can be viewed across business intelligence systems, especially machine networks. A blockchain public ledger can learning, which allow a system to learn from significantly increase transparency and trust data to recognize/apply patterns and develop 57 a way to present new data. The introduction of networks or they can change the rules and machine learning has paved the way for content of private blockchains. Furthermore, it advanced auditing, which can be enhanced is unreasonable to assume that businesses will with blockchain. completely abandon their IT infrastructure Ernst & Young, for example, has launched a and replace it with a blockchain. Instead, it will “plug-in, always-on” approach to using real- be one of the components of the IT time blockchain data to replace current infrastructure, and companies will start practices. Blockchain can transform current implementing blockchain in certain parts of auditing into a more accurate and timely their business to coexist with existing legacy automated assurance system and increase systems, as not all data can be stored on the trust in artificial intelligence systems. Once blockchain chain. records are approved, verified, and saved on the blockchain, they remain unchanged. The 4. Discussions benefits of implementing blockchain in auditing are as follows: continuous auditing Accordingly, the proposed solutions are using blockchain reduces the task of manual analytical and conceptual, requiring additional data extraction and audit preparation; in research and a detailed analysis of the companies engaged in service certification, possibilities of physical implementation within good blockchain connectivity makes it easier Ukraine and Ukrainian legislation. for auditors to collect audit evidence and The following issues need to be investigated: provide information quality assurance • Regulatory aspects and data privacy services; all records of business transactions in issues in the implementation of the blockchain chain remain confidential and blockchain technology in accounting. secure. • Development of mechanisms to protect While artificial intelligence and blockchain against a 51% attack. offer technological tools for auditors, they still need data standards to provide meaningful • Regulation of the regulatory framework. reporting. However, it is still being determined • Studying the technical features of the whether current XBRL reporting standards implementation of blockchain will be sufficient for artificial intelligence and technologies for enterprises, blockchain use. Whether XBRL can provide the institutions, and companies. quality, unambiguous data needed to make • Development of the concept of better use of AI and blockchain applications blockchain technology implementation, remains to be seen. including its technical component. In addition to the areas mentioned above, we also draw attention to the caveats that 5. Conclusions companies should consider when implementing this technology. Blockchain The concept of blockchain technology, in does not provide one-size-fits-all solutions, as particular its decentralized and distributed they can be applied explicitly to different nature, has proven to be essential to ensuring situations and are not the only possible answer high reliability and immutability of financial or even the best one. However, blockchain can data. Blockchain technology allows data to be solve current accounting problems by moving stored securely, making altering or falsifying to multi-party verification of transactions, thus data fraudulently complex. increasing trust and promoting digital Research on the use of blockchain corporate reporting. While no technology is technology in the economy shows its potential foolproof, the blockchain can only be altered to to revolutionize financial accounting by add false information or delete previous simplifying processes and increasing information if someone gains 51% of the automation. 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