Importance of Blockchain in Accounting

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Importance of Blockchain in Accounting

Sarah Dawson, CFO Tech Outlook | Monday, February 15, 2021

Blockchain will disrupt, and it is not a threat to accounting roles and the accounting profession, but an opportunity that makes the accountants' role easier.

FREMONT, CA: Blockchain, also known as distributed ledger technology (DLT), is a digital system that records asset transactions and their details in many locations simultaneously. Blockchains are developing blocks of transfers. These blocks can be assets of any digital kind. Traditional accounting manages and stores records in a centralized location, typically in an accounting software application database. When a client or regulator needs data, the accountant will get the data – only the accountant and auditor have access to the ledger.

However, blockchain is accessible to all parties by employing a triple-entry bookkeeping model. This means all stakeholders will have an identical copy of the ledger at all times. To alter information in the ledger needs the permission of everyone involved, which means data on the blockchain can be accurately depended upon. And the security is bulletproof as blockchain uses cryptography to secure information and private and public keys to authenticate users. Because all data in a blockchain are distributed and sealed, it is virtually impossible to manipulate information, preventing people from conducting any financial fraud. Blockchain records are referred to as immutable.

There is a need for an auditor in such a system; after all, if transactions are recorded in an immutable chain, with no apparent way of being altered, it creates a perfect audit trail. However, auditors need not worry; they will have a role to play – as long as humans are involved, a third party is needed to offer assurance over the validity of transactions. However, the future auditor will be more concerned with validating systems of governance and controls, validating the security and integrity of information within systems, and deciding whether platforms or applications are operating as intended. The future accountant must have a flair for IT. The accountant must function closely with the IT department so that they understand each other.

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