Int. J. Intellectual Property Management, Vol. 11, No.

1, 2021 63

Accounting information systems in the

blockchain era

Olga Fullana*
Facultad de Empresa y Comunicación,
Área de Economía y Empresa,
Universidad Internacional de la Rioja,
Avenida de la Paz 137,
26006 Logroño (La Rioja), Spain
Email: [email protected]
*Corresponding author

Javier Ruiz
Departamento de Economía Financiera y Contabilidad,
Facultad de Ciencias Económicas y Empresariales,
Universidad Complutense de Madrid,
Campus de Somosaguas,
28223 – Pozuelo de Alarcón (Madrid), Spain
Email: [email protected]

Abstract: In this paper we analyse the advantages that the application of

blockchain technology brings to accounting information systems (AIS), but
also highlight the potential issues with its use. We examine the use of
blockchain against the background of the historical evolution of AIS and
explain the operational fit of this technology in AIS. We then analyse the pros
and cons of the highly probable use of blockchain technology in AIS. For this
purpose, we review the relevant contributions on this subject in the accounting
academic literature to date and classify them into four categories on the basis of
their focus: governance, transparency and trust; continuous audit; smart
contracts; and roles of accountants and auditors. We also analyse the early
reactions of the accounting industry and regulators to this new technological
environment.

Keywords: triple-entry accounting; blockchain; accounting information

system.

Reference to this paper should be made as follows: Fullana, O. and

Ruiz, J. (2021) ‘Accounting information systems in the blockchain era’,
Int. J. Intellectual Property Management, Vol. 11, No. 1, pp.63–80.

Biographical notes: Olga Fullana is a graduate of the Universitat de València

(Spain) and a PhD, with honours, from the Universidad Cardenal Herrera –
CEU (Spain). Her research is focused on the field of financial analysis and
accounting. Currently, she is teaching accounting and business administration
at Universidad Internacional de la Rioja (Spain).

Copyright © 2021 Inderscience Enterprises Ltd.

64 O. Fullana and J. Ruiz

Javier Ruiz is a graduate of the Universidad Complutense de Madrid (Spain)

and a PhD from the Universidad Cardenal Herrera – CEU (Spain). His research
is focused on the field of macro finance and accounting. Currently, he is
teaching Accounting at Universidad Complutense de Madrid (Spain).

1 Introduction

Currently, professionals are broadly in agreement that blockchain technology will

profoundly change the nature of organisations to the extent that it converts the internet,
originally designed to move information, into an internet where value moves from person
to person without the need for an intermediary, thus reducing transaction costs. In fact,
the main contribution of the seminal study by Nakamoto (2008), where the authors
propose an electronic cash system (Bitcoin), was that blockchain, the new peer-to-peer
(P2P) technology, means that there is no need for intermediaries, in this case the central
banks.1 In this sense, Tapscott and Tapscott (2017) give examples of how blockchain will
transform the organisation and management of businesses in different areas such as:
human resources and procurement, finance and accounting, sales and marketing, legal
affairs, and raising capital. Hughes et al. (2019) have searched the academic literature and
found a list of potential blockchain-based applications that are deemed to offer
advantages over the traditional information system architectures. ‘Accounting and
assurance’ (Coyne and McMickle, 2017; Dai and Vasarhelyi, 2017) is also in their list.2
In this context, Tarifa-Fernández et al. (2019) more specifically explore the
challenges that blockchain poses for accounting information systems (AIS), delimitating
and classifying their actions and opportunities. These authors analyse the main theories
on firm management to study the impact of blockchain technology on accounting
information systems and its implications for company stakeholders. They found
seventeen effects of blockchain technologies in accounting information processes:
certainty about the completion of transactions; improvement in vendor/consumer
selection in the supply chain; alignment of organisational goal management actions; a
more harmonious relationship between managers and owners; automation of some
transactions; verification that accounting rules have been applied; avoidance of mistakes;
reliability in the information; deterrent against concealment; confirmation for both parties
that the transaction has occurred; security in terms of privacy of the information;
evidence that information has not been tampered with; inability to alter information;
reduction in lost data; trails allowing for the transaction to be traced; control of
management actions; and detection of any needs throughout the process.
This broad evidence leads to a clear consensus, as noted by Karajovic et al. (2019),
about the advantages that the application of the blockchain methodology brings to AIS. In
this article we analyse these advantages but also highlight the potential problems with
this application. To do this, initially we examine the application of blockchain against the
background of the historical evolution of AIS and explain the operational fit of this
technology in AIS; we then analyse the pros and cons of the highly probable use of
blockchain technology in AIS. For this purpose, following the generic work of Hughes
et al. (2019) and, more concretely, the work of Schmitz and Leoni (2019) looking
specifically at AIS, we review the relevant contributions on this subject in the accounting
academic literature to date. We complete our analysis by examining the early reactions of
 Accounting information systems in the blockchain era 65

the accounting industry and regulators to the adoption of blockchain-based AIS and the
foreseeable hurdles to overcome.
This article is structured as follows. After this introduction, we dedicate Section 2 to
discussing the triple-entry accounting that incorporates blockchain technology against the
background of the historical evolution of AIS. In Section 3, we briefly explain the
operation of triple-entry accounting that includes blockchain technology. In Section 4, we
analyse the academic literature on the introduction of the blockchain methodology into
AIS, selecting the most relevant works and classifying them into four categories based on
their focus: governance, transparency and trust; continuous audit; smart contracts; and
roles of accountants and auditors. Before reaching our conclusions, in Section 5 we
analyse the reactions of industry and regulators to blockchain-based AIS, and highlight
the difficulties in implementing this. We conclude with Section 6 where we set out some
additional remarks.

2 The path to a triple-entry accounting system

The need to register transactions has existed from the very start of trading. Early registers
allowed traders to follow the evolution of trading in goods through entries and exits, to
follow the evolution of cash, to evaluate costs, and to compute the net income obtained.
Such a system, in which accounting statements are recorded separately, is called a
simple-entry accounting system. By integrating both the income statement and balance
sheet in a consistent manner, as Ijiri (2014) notes, a layer of information was added that
led to the creation of the double-entry system.
Although there is general consensus about the widespread use of the double-entry
accounting system since the time of the publication of the Summa de arithmetica,
geometría, proportioni et proportionalita by Fra Luca Bartolomeo de Pacioli in 1494, as
Carlin (2019) points out, there is still controversy about the exact moment in which this
system started to be used. This author extensively analysed articles relating to this issue,
such as those by Kats (1929), dating its origin back to the time of the Roman empire;
Nigam (1986), dating it back to India and previously to the Greek and Roman
civilisations; and Scorgie (1994), who placed it in the Arab culture before the thirteenth
century, at the same time as the first double-entry accounting manuscripts appeared in
Italy, as Lee (1973) notes.
What is unquestionable is the enormous importance of the double-entry accounting
system to the point that it caused a revolution in the way business transactions were
registered. However, despite the benefits of the system, which are extensively discussed
in the accounting literature, see for example Cayley (1894), its use is not free from
criticism. In fact, the double-entry accounting system allows for errors and manipulation,
and it can therefore be improved.
Ijiri (1982, 1986) proposed a triple-entry accounting system which, from a financial
point of view, incorporates information about the time of the transactions, which he refers
to as ‘momentum’. Through the use of an interest rate, this information allows us to
integrate an analysis of the financial opportunity cost into the accounting information
system. Despite criticism and a lack of real implementation, as noted by Fraser (1993),
Ijiri’s system established the intellectual foundations for a triple-entry accounting system.
66 O. Fullana and J. Ruiz

It was later when Grigg (2005), in his working paper ‘triple-entry accounting’,
transformed the previous concept proposed by Ijiri (1986) by incorporating a digitally
and cryptographically signed receipt stored by a third party. This receipt guarantees the
transaction and allows stakeholders to verify if there has been any alteration in the
records kept by the two parties to the transaction. So, as Cai (2019) states, although Ijiri
was the first to use the term ‘triple entry’, it was in fact Grigg (2005) who redefined the
concept and coined the term that we currently use: ‘triple-entry accounting information
system’.
To gain a better understanding of the evolution of the triple-entry accounting system,
it is helpful to analyse the main characteristics that differentiate it from the double-entry
system. Following Dai and Vasarhelyi (2017), we can define the double-entry system as a
centralised system, with a high risk of manipulation, and that is labour intensive due to
the large volume of data operations and the relationships between them. It does not
permit self-executing contracts and its controls are designed ad hoc.
In contrast, an accounting system based on blockchain is decentralised, so
authority and control are distributed, reducing the risk of manipulation. It is also a
non-labour-intensive system and the databases it uses refer to linear transactions, making
data entry consecutive. Another of its fundamental characteristics is the possibility of
incorporating smart contracts that allow for self-executing processes, increasing the
capacity for control.
Other notable features of the triple-entry system are those highlighted by Weigand
et al. (2019), namely that it provides greater transparency in the information, is more
precise and more cost efficient, and this brings greater accuracy to financial reports. On
the other hand, Rîndaşu (2019) highlights the great flexibility that this technology brings
and the reduction in the incentive and opportunity for fraud. In this line, Wu et al. (2019)
suggest that this blockchain technology can significantly improve relevance, faithful
representation, opportunity, comparability and other aspects of accounting information.

3 Blockchain in accounting

Before analysing the different topics found in the academic accounting literature related
to blockchain, we briefly explain the concept of blockchain. To put it simply, we can
define blockchain as a sequence of cryptographically linked data records (blocks) that
allows us to manage the entire history of transactions carried out through a decentralised
ledger (public ledger). It allows us to observe how ownership of an asset is transferred
without the need for a central authority to validate the information, since different
peer-to-peer agents (nodes3) validate the transactions in a cryptographic way.
The operation of this distributed block technology is as follows. All the information
related to a certain transaction is entered in a block of information with its hash4 and the
hash for the previous block in the chain. This block is introduced into a chain with the
same characteristics, which guarantees the security and traceability of the block, since
any change invalidates the chain from that point.
To protect this blockchain, a decentralised work system called ‘proof-of-work’ is
used. Through so-called ‘mining’, ‘proof-of-work’ slows down the possibility of creating
new blocks and makes it difficult for the chain to be remade from a certain point. In this
context, the chance of manipulation is very small.
 Accounting information systems in the blockchain era 67

The nodes are responsible for completing the ‘proof-of-work’. The first ‘miner’ that
manages to decrypt the ‘proof-of-work’, verify the transaction and create a new block,
which has to be verified by all the nodes in the network, is rewarded with a fee. In this
way, the transaction can be verified through the network of nodes without the need for a
central authority, providing all the information through a public ledger.
With the help of a diagram, we can see a simplified example of how blockchain
operates in the case of an accounting entry. Let us assume that company A enters into a
transaction with company B, in which the former has to make a payment of one euro to
the latter. With respect to this payment, company A must credit its cash account and
company B must make the corresponding entry in the debit. In terms of this operation,
which for A represents an exit and for B an entry of funds, a public registry is created
where the two companies validate, through a signature that this operation has been
carried out. This public record is incorporated into a blockchain linked through the
previous and subsequent hashes in the way that we can see in Figure 1.

Figure 1 Simple representation of blockchain in accounting (see online version for colours)

Note: Simplified representation of how accounting operates in a blockchain environment.

A public record is created when Companies A and B validate that the operation has
been carried out. This public record is incorporated into a blockchain system,
making it immutable.
As we have seen previously, one of the main characteristics of a blockchain-based
accounting information system (AIS) is that the information is organised in a chain of
blocks that is distributed, decentralised and shared, building a database managed by
multiple participants distributed in a P2P network. That is why one of the most popular
names for this technology is distributed ledger technology (DLT). Thus, as Schmitz and
Leoni (2019) note, we can consider blockchain to be a system in which transaction
records stored in blocks are kept on several computers linked to a peer-to-peer network
68 O. Fullana and J. Ruiz

that uses algorithms to verify transactions (Coyne and McMickle, 2017; Dai and
Vasarhelyi, 2017; Kokina et al., 2017; Weigand et al., 2019; and Wu et al., 2019).
In a traditional database, the data is organised as rows in a table, i.e., an undistributed
ledger, where each record is stored in a single location and users can modify it by
accessing, amending and overwriting the original file. In contrast, a blockchain
Accounting Information System is developed on three levels: the level of data
management, a second level that logically transforms data into information and a third
level of presentation, which provides the interface. This feature makes blockchain-based
AIS more manageable, as Tan and Low (2019) demonstrate.
Another fundamental characteristic of blockchain technology when applied to
accounting is immutability. In a blockchain, records are added in blocks chained together,
since the last piece of information in a block is the first in the next one in the chain. This
way of organising data into chained blocks allows for the immediate detection of any
attempt at manipulation. The operating scheme in which each block has to be validated
by different nodes before being included in the chain, and copies of the block are kept in
different independent and decentralised points, makes the previously validated chain
unilaterally immutable (Tan and Low, 2017; O’Leary, 2018; Stein, 2018).
One of the greatest strengths of blockchain technology is transparency. This is
achieved through the distribution of information in decentralised network nodes.
Nevertheless, this feature is also one of its main dangers: the protection of the privacy of
the distributed information. For this reason, it is important to consider who has access to
information in this technological context. According to Rîndaşu (2019), following the
previous literature in this field (Hamida et al., 2017; Lin and Liao, 2017; and Peters and
Panayi, 2016), it is appropriate to distinguish between the different types of blockchain
according to the different types of information access permission:
1 Public blockchain: defined by anonymity, decentralisation and transparency. Anyone
can participate in validating a block. The problem that may arise in its application in
the field of accounting is that anyone can add a block to the network. This issue
could be resolved through unidirectional homomorphic encryption5. This would
imply that transactions are recorded in the ledger, but only authorised personnel can
decipher the details (Bradbury, 2015).
2 Private blockchain: in this case, the validation of the block requires the prior
authorisation of a central authority. It allows for greater speed at the cost of reducing
transparency, although it remains equally reliable. With this alternative only
authorised users who have permission can see the contents (Coyne and McMickle,
2017; Yermack, 2017). In this case, external auditors must be authorised to perform
their work as O’Leary (2017) points out. However, the records could be altered with
the agreement of 51% of the participants, which leads us to the next alternative.
3 Consortium: in this case, a group of organisations are in control of the validation,
resulting in it becoming partially decentralised (Zheng et al., 2018) and incorporating
the best features of the two previous systems.
4 Semi-private: although nowadays this is only considered theoretically (Hamida et al.,
2017), in this case access to information is allowed for different participants without
having to be authorised by the same control authority.
 Accounting information systems in the blockchain era 69

4 Blockchain in the accounting academic literature

The relevant academic literature related to the use of blockchain in accounting is

relatively recent. In fact, the topic is in its infancy, as Figure 2 shows. In this figure, we
can observe the results of searching for academic articles year by year in Google Scholar,
from 2008 to (October) 2019, using the terms ‘blockchain’ and ‘accounting’. We can see
that until 2016 there was no significant increase in the articles found in this database.
Furthermore, conducting an analysis of the articles found prior to that date, we found that
there were no peer-reviewed academic journals.

Figure 2 Academic literature relating to accounting and blockchain (see online version
for colours)

Note: The left side of the graph shows the evolution of the entire literature on blockchain
and accounting found from a Google Scholar search from 2008 to October 2019.
The right side illustrates the most relevant papers in the academic literature. We
can observe that literature does not start to appear until 2016.
In this context, following Schmitz and Leoni (2019), we performed an analysis of
academic papers from 2006 with the following criteria: in addition to the aforementioned
‘blockchain’ and ‘accounting’ terms, we incorporated into the search the related concepts
of ‘auditing’ and ‘distributed ledger technology’, as well as all possible combinations of
these. We eliminated working papers, congress documents and non-scientific articles, in
addition to papers published in non-indexed journals in the JCR and SCOPUS databases.
We also excluded articles mentioning the subject but that did not have a direct
relationship with it.
Schmitz and Leoni (2019) found 16 academic articles for the period 2016 to 2018
and, extending the analysis period to October 2019, we found 34. In Figure 2 we can
observe their year-by-year distribution, showing how, although there is very scarce
production, in the few months since the work of Schmitz and Leoni (2019) the number of
published papers related to the use of blockchain in accounting has grown very quickly.
The 34 academic papers analysed are listed in Table 1. To give continuity to work of
Schmitz and Leoni (2019), we followed their approach and classified these papers into
the four areas in which research is taking place in this field: governance, transparency
and trust; continuous audit; smart contracts; and roles of accountants and auditors. The
main ideas discussed in these fields of study are detailed below.
70 O. Fullana and J. Ruiz

Table 1 Relevant academic literature on accounting and blockchain

Governance,
Continuous Smart Roles of
transparency
audit contracts auditors
and trust
1 Atzori (2017) √
2 Bonsón and Bednárová (2019) √ √ √
3 Cai (2019) √ √ √ √
4 Cao et al. (2018) √
5 Carlin (2019) √ √ √
6 Coyne and McMickle (2017) √ √ √
7 Crookes and Conway (2018) √ √
8 Dai and Vasarhelyi (2017) √ √ √ √
9 di Fiammetta (2017) √ √
10 Fanning and Centers (2016) √
11 Karajovic et al. (2019) √ √ √ √
12 Kokina et al. (2017) √ √ √
13 Kozlowski (2018) √ √ √
14 Liu et al. (2019) √ √ √
15 Marrone and Hazelton (2019) √
16 Moll and Yigitbasioglu (2019) √ √ √
17 Nordgren et al. (2019) √ √ √
18 O’Leary (2017) √ √
19 O’Leary (2018) √ √
20 Ølnes et al. (2017) √
21 Peters and Panayi (2016) √ √
22 Rîndaşu (2019) √ √ √ √
23 Rooney et al. (2017) √ √
24 Rozario and Thomas (2019) √ √
25 Rozario and Vasarhelyi (2018) √ √ √
26 Rückeshäuser (2017) √ √
27 Schmitz and Leoni (2019) √ √ √ √
28 Sheldon (2018) √ √
29 Sheldon (2019) √ √ √
30 Tan and Low (2019) √ √ √
31 Wang and Kogan (2018) √ √
32 Weigand et al. (2019) √ √
33 Wu et al. (2019) √ √ √
34 Yermack (2017) √ √ √
Note: This table shows the most relevant academic literature from 2016 to October 2019.
It includes all papers relating to accounting and blockchain published in indexed
databases (SCOPUS and JCR).
 Accounting information systems in the blockchain era 71

4.1 Governance, transparency and trust

The security, transparency and immutability characteristics highlighted in Piazza (2017),
as well as the improvement in the quality of the accounting system in terms of
auditability and interoperability noted in Weigand et al. (2019), are characteristics of
accounting records via blockchain technology. These directly improve governance and
transparency for all company stakeholders to the extent that they can have immediate and
accurate access to all data about the company (Atzori, 2017). Likewise, these
characteristics produce a very important change in the risk assessment of the company
(Byström, 2019).
Yermack (2017) contemplates the possibility of granting differentiated access to
different stakeholders and shareholders, which would improve transparency and trust
(Hileman and Rauchs, 2017). The author distinguishes between private and authorised
blockchain that, supported by an adequate architecture and improvements in
cyber-security, as Bonsón and Bednárová (2019) argue, would enhance not only the
quality of the information, but also its “relevance, faithful representation, timeliness,
comparability, verifiability, and the cost-benefit principle of accounting information” as
Wu et al. (2019) point out, therefore improving the accounting information system as a
whole.
Another important issue related to this field is the possibility that blockchain’s ability
to prevent fraud is being overestimated, as Rückeshäuser (2017) states. However, it is
equally true that this technology can help to identify fraud in real time (Wang and Kogan,
2018). Moreover, as the challenge for the accounting profession is to be aware of all
cases of professional misconduct, Sheldon (2018) proposes a solution to this problem
through the use of blockchain technology in such a way that all cases of professional
misconduct are recorded in a public book.

4.2 Continuous audit

The concept of an audit may undergo a drastic transformation if it is possible to go from
being done periodically to being done continuously over time, i.e., a real-time audit. To
feed into this system, the auditor needs to have a record of all transactions updated in real
time. This can be achieved with blockchain technology, which also ensures that the
records have not been altered (Rooney et al., 2017).
Schmitz and Leoni (2019) consider that blockchain technology removes the need to
enter and reconcile accounting data in multiple databases. As a result, it saves time and
the risk of human error is substantially reduced (Rîndaşu, 2019). In relation to this issue,
Sheldon (2019) points out that the introduction of blockchain technology minimises, on
the one hand, the risks related to the modification of historical data, and on the other, the
need for data backups, since batch processing across nodes makes recovery very simple.
Additionally, the existence of smart contracts allows for more efficient control of the
transaction and registration processes (Dai and Vasarhelyi, 2017; Kozlowski, 2018;
Rozario and Vasarhelyi, 2018; Cao et al., 2018). All these factors make audit cheaper and
more efficient in a blockchain framework (Rozario and Vasarhelyi, 2018; Rozario and
Thomas, 2019; Cao et al., 2018).
Finally, another relevant aspect in this area, in this case introduced by Cao et al.
(2018), is the reduction in the incentive for clients to make misstatements, which
increases the efficiency of an audit, also reducing the difference between the expectations
72 O. Fullana and J. Ruiz

of the auditors, the users of the financial reports and the regulators, as noted in the
aforementioned work by Rozario and Thomas (2019).

4.3 Smart contracts

One of the key elements in the evolution of blockchain applied to accounting is the
development of smart contracts. This concept, introduced by Szabo (1997), can be
defined following Carlin (2019) as executable programs that operate within a blockchain
ecosystem that automatically carry out defined actions when defined triggering
conditions arise. Thus, smart contracts allow us to automate a series of tasks, reducing
time, costs and operational errors by eliminating processes that have usually been done
manually (Coyne and McMickle, 2017; Ølnes et al., 2017; Rozario and Vasarhelyi,
2018). Note that this feature of blockchain technology is not limited to legal and
administrative applications, but can be used to replace virtually any task that can be
automated. This allows for the verification, control and digital compliance of transactions
(Peters and Panayi, 2016; Hileman and Rauchs, 2017), and improves safety and speed
(Nordgren et al., 2019).
Another interesting point raised by Rîndaşu (2019) concerning smart contracts is their
potential for facilitating accounting processes and thereby producing an improvement in
performance reporting costs. The same happens with the autonomous transaction register
in accordance with the terms agreed in the smart contract, as suggested by Dai and
Vasarhelyi (2017). Weigand et al. (2019) highlight the lesser need for coordination
between units and the existence of greater privacy in transactions as being the most
important benefits of this technology.
According to various authors, such as Dai and Vasarhelyi (2017) and Rozario and
Vasarhelyi (2018), among others, this type of contract facilitates audit processes by
automating the transaction reconciliation procedure and improving transparency by being
able to issue reports almost in real time, also reducing the risk inherent to the human
factor (Kokina et al., 2017). However, there is still a role for the human auditor since
there are certain functions that will always require the experience and assessment of the
human factor, as Rozario and Vasarhelyi (2018) note.

4.4 Roles of accountants and auditors

Most of the academic work existing so far points towards a clearly negative impact on the
accounting and auditing profession, (Peters and Panayi, 2016; O’Leary, 2017; Yermack,
2017; Casey and Vigna, 2018), even predicting the end of the industry as a result of
automating processes, with these professions becoming obsolete. Nevertheless, as
Marrone and Hazelton (2019) argue, there is still plenty to work to be done to explore
both the benefits that this technology can bring to the accounting profession and its
limitations.
As Sheldon (2019) states, “it is not reasonable to believe that organisations will
completely abandon their existing information technology (IT) infrastructure and replace
these with a blockchain (nor that a blockchain could perform all the necessary tasks in an
IT function). Rather, it is likely that organisations will slowly start to implement
blockchains in certain parts of their business, meaning that blockchain will have to exist
alongside legacy and enterprise resource planning (ERP systems)”.
 Accounting information systems in the blockchain era 73

Likewise, Lazanis (2015), Yermack (2015) and Tan and Low (2019) predict a
transformation of the accounting profession that relegates auditors to a secondary role.
More specifically, Lazanis (2015) estimates that this will occur within a decade. In
contrast, Cai (2019) considers that what makes the work of auditors and accountants
valuable is the confidence they generate for markets and institutions, and that a new and
more efficient way of carrying out accounting can increase trust and transparency,
thereby altering the entire accounting and auditing industry in a positive way. This is also
argued by Carlin (2019).
However, it is also argued that blockchain technology can only provide confidence
that the transaction has occurred, not whether the transactions are legal or has been
authorised. It is also argued that this block system cannot verify whether the transaction
has occurred in the real world. This is why authors such as Coyne and McMickle (2017),
Dai and Vasarhelyi (2017), Kokina et al. (2017), Kozlowski (2018), Rozario and
Vasarhelyi (2018) and Sheldon (2019) suggest that these professions cannot be directly
replaced by blockchain technology.
As pointed out by Crookes and Conway (2018), both professions, accounting and
auditing, must adapt to the new framework created by the transformation of their work.
Liu et al. (2019) exhaustively list the opportunities and challenges from applying
blockchain to the audit profession, differentiating in their work between tasks to be
performed in either permission-less or permissioned blockchain, as well as the impact on
audit practices, both external and internal.
It is also important to highlight the analysis carried out by Moll and Yigitbasioglu
(2019) on how the accounting profession will be affected not only by blockchain
technology but also by all those related to the internet, big data, artificial intelligence and
cloud services. These authors raise a series of interesting questions about accounting in
relation to three aspects: management accounting, financial accounting and audit. This
opens up not only a wide range of research topics, but also a series of changes to be made
in the accounting environment. Along the same lines we find the work of Wu et al.
(2019), which includes an innovative model of how an accounting information system
could be based on both blockchain and the internet of things.
Karajovic et al. (2019) argue that due to the system’s self-audit capabilities and its
immutable nature, the evolution of blockchain seems to have the potential to completely
eliminate the accounting profession. However, the fact that the big 4 (PwC, Deloitte, EY
and KPMG) have begun to explore how to integrate this technology into their procedures
and techniques means that we need to consider the future of the auditing and accounting
profession from a more pragmatic perspective. The four companies are addressing the
issue from the perspective that it is a necessary technology and, as such, they are
exploring its introduction across a broad spectrum of possible applications, as well as
looking at both public and private aspects of blockchain technology.

5 Early reactions to the adoption of blockchain-based AIS and issues

arising

Karajovic et al. (2019) summarise the most important actions carried out for the
introduction of blockchain technology by the main auditing companies. In this phase of
74 O. Fullana and J. Ruiz

the early adoption of the technology, the most significant initiatives carried out by the
big 4 are the following:
1 The development by PwC Australia of a blockchain platform (Vulcan) that develops
interoperable digital assets to be commercialised with crypto-currencies.
2 Deloitte has also started working on its own blockchain (Rubix) in 2014, created to
simplify and accelerate the process of auditing transactions using blockchain, trying
to improve supply chain management and addressing issues related to digital identity
and commerce, international transactions and banking, and the management of
loyalty and rewards programs.
3 EY, together with Accenture, has experimented with editable blockchains that allow
for their modification if certain events occur. It is also looking for ways to implement
blockchain in understudied markets, focusing on the entertainment industry and
energy sectors.
4 KPMG, through a partnership with Microsoft, has introduced the Digital Ledger
Service to advise customers on how blockchain can help improve the speed and
security of transactions, reduce costs and digitise administrative operations.
We can also observe cases of early adoption of this technology in countries such as Dubai
and the State of Delaware. These pioneering experiences in this field allow us to observe
the challenges and problems encountered with blockchain implementation in the field of
accounting. Among the most important challenges it will need to overcome, Deshpande
et al. (2017) highlight the lack of favorable legislation in most countries. For example, we
can see that in Europe, the General Data Protection Regulation (GDPR), established in
May 2018, creates a problem. Any data subject can ask for their data to be deleted, that
is, they have the ‘right to be forgotten’, which in the case of blockchain is difficult to
verify when the data is encrypted (Rîndaşu, 2019).
Cai (2019) argues that the main reason why blockchain technology has not been
massively adopted in accounting is scalability, and Bonsón and Bednárová (2019) add
challenges such as flexibility, adequate architecture of the system, and cybersecurity.
Other authors, such as Nordgren et al. (2019), raise a subject not previously considered:
the environmental impact. Rîndaşu (2019) highlights the issue of company stakeholders
understanding the implications of this technology and the initial costs of its
implementation. Nofer et al. (2017) even raise the possible alteration of the current
business model of companies.
In keeping with Nordgren et al. (2019), who state that the issue is being given too
much importance, Coyne and McMickle (2017) suggest that, due to the lack of trust in
the system, its application in accounting is not feasible. They argue, on the one hand, that
companies are unlikely to want to share their information on a public network. They
contemplate the possibility of retroactive manipulation of blocks in the case of private
blockchain, to which we must add the trust problems caused by the limited number of
nodes. Another issue raised by these authors to suggest that the system is not very viable
is the current possibility of verifying economic transactions outside accounting records,
something which is not the case with blockchain-based currencies as they only exist in a
virtual environment. This is a key difference between the two applications of the same
technology.
 Accounting information systems in the blockchain era 75

All these problems, in addition to issues such as technological obsolescence, as well

as the integration with current systems, raise concerns regarding its future evolution. The
creation of consortia for the development of compatible and uniform blockchain systems
applied to the accounting industry (Accenture, Microsoft and ConsenSys are part of the
Enterprise Ethereum Alliance) will help with its widespread implementation. In addition,
the big 4, along with other important industry actors in the USA such as Grant Thornton,
the American Institute of Public Accountants and XBRL, are considering creating a
blockchain consortium for the accounting industry. Additionally, there are two companies
creating triple entry software (Balanc3 and TriplEntry), which can help to unify records.

6 Final remarks

An increasing number of authors in the academic world are analysing how the use of
blockchain technology in the accounting environment will affect different areas of
organisations. This is a disruptive technology which, as Yermack (2017) points out,
represents a leap forward in the way we understand the performance of accounting.
However, many issues are still to be resolved.
The main characteristics of a triple-entry accounting system based on blockchain
technology are: greater transparency of information, this being more precise and efficient,
its flexibility, and fundamentally the immutability of the data. These characteristics make
this technology desirable both for those in charge of carrying out accounting, such as
auditors, and for all company stakeholders. That is why the big 4 are beginning to
participate in consortia to develop applications in this technological framework. This
indicates that this new way of understanding accounting, contrary to what some people
may think, will be the future of the accounting industry.
It is not easy to predict when and with what intensity this adaptation will occur.
However, Carlin (2019) reminds us that accountants have historically been avid adopters
of new technologies: from fountain pens to mechanical calculators in the pre-transistor
era and finally to spreadsheets. Therefore, the adoption of a triple-entry accounting
information system based on blockchain technology is foreseeable.
In this context, accountants and auditors must acquire new skills and improve their
existing ones to adapt the industry to the new technological scenario and its dynamics.
Authors such as Tan and Low (2019) expect an improvement in efficiency and
effectiveness in the industry due to a reduction in error rates in the database engine and
weaker incentives for accounting fraud. However, this is a research question that, among
many others, should be empirically tested in the future when blockchain-based AIS
become available.

Acknowledgements

Authors thank financial support from Spanish Government and European Commission
(MINECO-FEDER ECO2015-65826-P).
76 O. Fullana and J. Ruiz

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Notes
1 Satoshi Nakamoto is a pseudonym for the working group that developed the Bitcoin protocol.
2 The other potential blockchain-based applications that Hughes et al. (2019) list are: Peer
review system (Avital, 2018); Smart contracts (Bailis et al., 2017; Beck et al., 2017; Gomber
et al., 2018; Iansiti and Lakhani, 2017; Ølnes et al., 2017; Peters and Panayi, 2016; Staples et
al., 2017; Swan, 2015); Online dispute resolution (Barnett and Treleaven, 2017); Trust-based
payments (Beck et al., 2016; Expert system (Carreño et al., 2019); Distributed collocation
storage architecture (Fengi et al., 2018); and Payment clearing and credit information (Guo
and Liang, 2016).
3 A node is a device in a blockchain network. The role of a node is to support the network by
retaining a copy of a blockchain, and, in some cases, to process transactions.
4 A hash is a unique code for each block that allows for its identification. Any change in the
hash causes the block to change.
5 Homomorphic encryption is a type of encryption algorithm that allows calculations with
encrypted data without having to decrypt them first (Gentry and Boneh, 2009).