“In Blockchain We Trust.” Sound familiar? Throughout the past decade, a quiet technological revolution has been brewing. With its initial debut through Bitcoin in 2008, a peer-to-peer electronic cash system, blockchain technology has managed to evolve and impact almost every potential industry. Spanning several phases of evolution, blockchain has become a factor to consider for financial institutions around the world. In 2017 alone, there has been a 15% increase in banks expecting to implement blockchain technology into their processes.
With many of the major banks now actively researching and experimenting with blockchain technology, this has had a trickle effect to other service industries – particularly accounting. One may ask, “how do accounting and blockchain relate?” Simply put, once someone records anything into a system, there is no going back. Anyone, and everyone, can see what has been recorded and nobody can adjust these original records.
Blockchain seamlessly aligns with what accounting should achieve: reliability, transparency, and accuracy. Accounting has had many controversial issues in the past. The most notorious, and unforgettable, was in 2001 with the eruption of the Enron controversy that resulted from fraudulent reporting. Even though legal actions were taken to prevent further corruptive behaviors, several more accounting scandals presented themselves despite the efforts of the Public Company Accounting Oversight Board.
Knowing all too well that accounting can easily be manipulated and purposefully altered, many big accounting firms have viewed blockchain as the potential solution. Blockchain creates a new accounting ledger – a ledger that not only allows continuous updates and verifications but also prevents any corruption through intentional alterations. Blockchain opens the possibility for accountants to access a decentralized general ledger without any loopholes for anyone to manipulate records in secret. All adjustments are made subsequently to the original transaction records and all accounting activities thereafter are transparently streamlined.
Although blockchain technology sounds like the perfect solution to some, the disruptive technology of blockchain makes many accountants fear for their jobs. Nonetheless, despite blockchain technology’s ability to provide an efficient and transparent process for accounting, blockchain does not analyze and interpret numbers as accountants do. Accounting is not solely numbers. Accounting calls for many areas of professional judgment, something no technology can spontaneously perform. Nonetheless, the skepticism and reasons for rejecting blockchain are valid. For now, blockchain technology is still a blooming revolution that requires further research with constant trial and errors. One thing for certain, however, is that blockchain technology may be the next step to evolve the efficiency and reliability of the accounting profession.