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Blockchain: Emergent Industry Adoption
and Implications for Accounting

Julia Kokina
Assistant Professor of Accounting
Babson College
231 Forest St.
Babson Park, MA 02457
[email protected]
(Corresponding Author)

Ruben Mancha
Assistant Professor of Information Systems
Babson College
231 Forest St.
Babson Park, MA 02457
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[email protected]

accepted
Dessislava Pachamanova
Professor of Analytics and Computational Finance
manuscript
Zwerling Family Endowed Research Scholar
Math and Science Division
Babson College
231 Forest St.
Babson Park, MA 02457
[email protected]
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Blockchain: Emergent Industry Adoption

and Implications for Accounting

ABSTRACT
Blockchain is a distributed ledger technology poised to transform the accounting practice. In
this paper, we provide an initial examination of the technology itself and discuss the associated
opportunities and limitations. We also present an overview of the current blockchain-related
practices in large accounting firms and trace significant milestones in this technology’s
emergence. Finally, we discuss some potential areas that future research could address.
Keywords: blockchain, distributed ledger technology, smart contracts, accounting

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accepted
manuscript
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I. INTRODUCTION
This paper is motivated by the need for accounting academics and practitioners to become
familiar with cutting-edge technologies for both the accounting information systems research
and education to parallel practice (Coyne, Coyne, and Walker 2016). Blockchain is one such
cutting-edge technology poised to transform invoicing, payment processing, contracts, and
documentation with significant implications for accountants, finance professionals, and the
regulators (Baron 2017; Dai and Vasarhelyi 2017). The goal of this paper is to provide an initial
understanding of this emerging technology through the lens of challenges and opportunities: to
analyze what makes blockchain technologically possible, to trace the milestones surrounding
the evolution of blockchain, to examine the applications of blockchain in accounting, and to
investigate current blockchain-related practices in large accounting firms.

Blockchain technology has received much press coverage in the last few years. It has
been called a “game changer” (Deloitte 2016), a foundational technology that can result in new
economic and social systems (Iansity and Lakhani 2017), and “the fifth pillar of the IT
revolution,” after mainframes, personal computers, the internet, and social media (Thakkar
2017). Having originally gained recognition as the technology that underpins the crypto-
currency bitcoin, blockchain is notable for its potential to provide trust in a network without a
central authority.

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Because no central authority is required, the technology could be a democratization
force in a variety of industries and has the potential to reduce transaction costs at a scale at

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which the internet reduced communication costs (Lundy 2016). It is predicted that the
blockchain market for enterprise applications will grow from $2.5b in 2016 to $19.9b by 2025

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(Tractica 2016), and that 10% of global GDP will be on a blockchain (World Economic Forum
2017). The financial services industry has been leading the efforts to realize the potential of the
new technology (e.g., Shubber, 2015; Tapscott and Tapscott, 2017), but today the technology is
finding also numerous other applications, including in supply chain management, maintaining
government records such as land ownership, and healthcare. Such changes could have big
implications for the accounting profession.

II. LITERATURE REVIEW

How Does Blockchain Work?

Blockchain is a digital ledger—a collection of records with verifiable integrity. It uses a global
distributed network of computers to record transactions in a way that they cannot be altered
once approved: it relies on participating computers’ processing power to verify transactions
using protocols in a process dubbed mining. The nodes (i.e., users) —called miners— are
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incentivized to participate in the creation and verification of blocks.

The blockchain system facilitates trustless and distributed consensus, without the need
for a trusted third party to verify the transactions. The use of a distributed network also ensures
that the blockchain system is resilient to disruptions. Figure 1 compares a distributed network
to decentralized and centralized networks. Many implementations of blockchain technology
(e.g., bitcoin) use a permissionless approach, in which anyone can become a miner in the
network.

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Figure 1. Network structures (adapted from Baran 1964)
The blockchain entries, called “blocks,” are added and can be seen by any part of the network.
Each block, the information it contains, is validated by the nodes in the blockchain network
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before it is approved. When the nodes arrive to a consensus, the block is verified and added to

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the chain of blocks in chronological order, to establish the record (i.e., each block contains the
identifier of the previous block in the chain). The decentralization of the blockchain system,
without a central authority approving the transactions, means that the blocks cannot be
tampered with and that the behavior of the system cannot be changed.
Blockchain Technology Ensures the Integrity of the Records
The transactions stored in a block of the blockchain cannot be altered. This is achieved using a
hash function: a mathematical formula that processes the content of the block (the
transactions) and generates a hash or digital fingerprint for it. Some characteristics of the hash
function are as follows:

• Any change to the content of a block will result in a completely different hash.
• The output of the hash function is unpredictable, almost unique, and looks like a
random sequence.
• Hashes are short and have a pre-defined length.
• The hash of a block is added to the next block in the blockchain, affecting its hash.
• The original content of the block cannot be obtained from its hash (hash functions are
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one-way).
In reality, the hash function is applied iteratively to different parts of the content of the
block in what is called “the Merkle Tree.” The result of the process is a final root hash, the
Merkle root, or “hash of hashes” that serves to identify the content of the block.
Yarmack (2017) and Dai and Vasarhelyi (2017) provide an accessible introduction to
some of the concepts described in this section. A detailed, more technical description of the
protocol in relation to Bitcoin is available from https://bitcoin.org/en/developer-guide.
The Creations of Blocks Requires Solving a Puzzle
Before a block can be incorporated into the blockchain, it needs to be solved. The task of
solving a block requires more than simply calculating the hash of the block: it calls for the
identification of an arbitrary number, called “nonce,” resulting in a hash of the block header
that meets certain criteria: the hash of the header has to be smaller than a given target. The
identification of an adequate nonce requires multiple attempts and computing processing
power. The header, in addition to the nonce, includes the hash of the previous block, the
Merkle root or hash of the transactions it contains, and a timestamp. Once a miner finds a
suitable nonce, its validity is verified by (a majority of) the miners in the blockchain and it is
added to the network.

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Blockchain Can Use Smart Contracts
A “smart contract” is a set of software-driven rules that encapsulate the terms agreed by the
parties involved. Although it is not an inherent requirement of blockchain technology, smart

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contracts can be incorporated into the blockchain and executed when certain conditions are
met, without the need for trusted intermediaries to participate in the process of verifying and
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executing the contract. It is possible for the smart contract to use multiple conditions to fulfill
the requirements to activate it, in response to a transaction calling it. The smart contract is
stored in the blockchain. In general, as the contract becomes part of the blockchain, it is visible
to anyone, but there are technological solutions to hide the information of the contract code
(Buterin 2016). Watanabe et al. (2016) discuss in detail the implications of recording contracts
in a blockchain.
As a simple example, blockchain technology with smart contracts can be deployed to
allow the use of a resource in a peer-to-peer lending network (e.g., car sharing). If the
conditions for the use of a particular resource are met (e.g., a car is available on the terms
provided by the requester), then its execution would result in the completion of the transaction
and exchange of payment for the resource (e.g., Reuters 2017).

Many Possible Blockchain Implementations

The principles of blockchain technology, first developed for Bitcoin, can be subject to many
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variations. Parties implementing a blockchain-enabled exchange can design it as a

permissionless system to which anyone can join, or restrict who can participate in the
transaction or verification processes. The latter private model is being researched in particular
by financial institutions and accounting firms. Also, new blockchain implementations can make
use of a variety of protocols to determine miner rewards for the creation and verification of
blocks (Castor 2017). The two main protocols used as part of a blockchain are proof-of work
and proof-of-stake.
Proof-of-Work (PoW) – To create transactions as part of a block, miners solve a computing-
intensive task (e.g., identifying a nonce that makes the hash smaller than a given parameter). In
exchange, the miner solving each block problem announces the solution to the network and
receives a prize reward. Once verified by the network, the block with transactions is stored in
the public blockchain. The PoW protocol deters denial-of-service attacks on the network by
imposing work from the service requester (i.e., consumption of computer resources,
electricity), while still making it possible for members of the blockchain to participate in
exchanges. Bitcoin is a PoW cryptocurrency (Bitcoin n.d.).
Proof-of-Stake (PoS) – The miners (denominated “forgers” when using this protocol) do not
receive rewards for solving a block, but for verifying transactions. Blocks are assigned to be
solved by a participant using a probabilistic algorithm that accounts for the wealth (i.e., stake)
of participants in the network in a process denominated “forging.” Those who are highly

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invested in the network are expected to have the greatest interest in protecting it to preserve
the value of their investment.
Limitations and Challenges of Blockchain Technology
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There are limitations and challenges associated with the implementation and use of blockchain
technology. manuscript
The design of the blockchain and use of a consensus protocol have implications for the
trust in the decentralized and unregulated system, and security is a limiting factor in the
adoption of blockchain implementations. A blockchain implementation needs to result in a
large distributed network to be successful, which implies that the protocol should provide the
right incentives to the participating agents. Blockchains designed as public systems (i.e.,
permissionless), allowing anyone to join, are susceptible to the “51% attack,” or the
manipulation of addition of new blocks to the blockchain by a majority of agents participating in
the distributed network (Witte, 2016). However, blockchains designed as private systems (i.e.,
permissioned), primarily for the financial industry, lack transparency and the incentive structure
to benefit from the decentralization, and they serve more as sophisticated transactional
databases.
Blockchain does not necessarily prevent theft of property when used for payments. To
understand this, it should be noted that bitcoin and other cryptocurrency transactions are
stored in the blockchain as the public keys of cryptographic public/private key pairs. Individual
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users retain the private keys for the transactions, which can be used to access a bitcoin address
to spend the funds. (See https://en.wikipedia.org/wiki/Public-key_cryptography for an
introduction to public-key cryptography and Witte (2016) for an accessible explanation of how
this process works in the case of bitcoin.) These private keys are stored in “wallets”
(http://www.coindesk.com/information/how-to-store-your-bitcoins/). However, the
information stored in a wallet can be stolen (Witte, 2016), for example, by cracking insecure
passwords or phishing scams. In addition, the anonymity of bitcoin users “opens up
opportunities for dishonest traders to scam during transactions” (Sas and Khairuddin 2017).
This also makes cryptocurrencies the currency of choice for online extortion (e.g., payments
requested by ransomware) and fraudulent online payments. A list of examples of large “bitcoin
heists” is compiled by Estes (2014).
The use of smart contracts raises additional issues. Smart contracts are computationally
expensive, as miners have to complete the calculations to trigger the execution of the contract,
and the lack of central authority raises issues about regulation and who is responsible for
solving software-related problems if they were to arise. In addition, smart contracts may
introduce vulnerabilities in the system. The DAO attack, in which a hacker managed to drain
millions by exploiting a “recursive call bug” in the smart contract code, is one such example.
(See Siegel 2016 for an excellent summary of the incident.)
From a technical perspective, the scalability of blockchain is an issue, as blockchain is

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purposefully computationally intensive. For example, bitcoin can handle up to 7 tps
(transactions per second; Gilbert 2016). Although under-development implementations can
scale multiple orders of magnitude that number (Croman et al. 2016), the current capacity of

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blockchain is insufficient for financial institutions such as payment and settlement networks,
which process thousands of transactions per second (Gilbert 2016, Cochrane and Sands 2017).
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For example, VISA processes 4,000 tps, and Depository Trust and Clearing Corporation’s
Universal Trade Capture processes 47,000 tps (Cochrane and Sands 2017). The Lighting
Network (https://lightning.network/) is one of the most promising blockchain implementations,
with the capacity to handle millions of transactions per second.
Finally, of particular relevance to the role of the accountant, consulting companies are
yet to create the tools and design the protocols to audit blockchain-stored transactions (Smith
2017). Table 1 summarizes some of the important terms associated with the blockchain
technology covered in this section.

Table 1
Important blockchain concepts
Block Miner Hash Function
(Forger under PoS)
Bundle of transactions Node in the distributed One-way function that
that has to be verified and global blockchain produces a hash from
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by the miners to be system that provides digital content (i.e., a

incorporated into the computing power to block; Witte 2016).
chronological sequence create blocks and SHA-256 is a common
of blocks (i.e., verify transactions, and function used in
blockchain). stores the blockchain. blockchain
implementations
(Bitcoin n.d.).
Hash Consensus Protocol Smart Contract
Fixed-length output of Set of rules that specify Terms of agreements
the hash function that how miners utilize stored in a blockchain
is used to uniquely their computing that will be executed
identify each block in a resources to create once pre-specified
blockchain. blocks, arrive at conditions are met
consensus (i.e., verify (Stark 2016).
blocks), and the type of
prize the miners
receive (Bitcoin n.d.).

Blockchain Milestones and Applications

Reviewing the milestones for blockchain’s adoption is important for understanding the
complicated landscape of its applications today and for anticipating significant industry trends.

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This section reviews the timeline for the development of the blockchain technology,
summarizing entry points for various adaptors of the technology.
In 2008, Satoshi Nakamoto’s (a pseudonym for an unknown person or group) white

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paper introducing the world to bitcoin was published. Blockchain was the technology

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underlying bitcoin. The financial industry was the first to realize the distributed database
technology potential as something separate from bitcoin. Five years after, in 2013, Fidor Bank
began experimenting with digital currency exchange and bitcoin trading. Fidor Bank also
partnered with Ripple (at the time, called OpenCoin) to implement money transfers in a digital
currency system that relied on members of the network to verify transactions instead of the
mining process used by bitcoin (https://en.wikipedia.org/wiki/Ripple_(company)).
Ripple is an example of a company that offers private blockchain solutions for financial
settlements, and there are other competing projects in the blockchain space. In 2014, R3
(R3CEV, LLC), a blockchain technology company, was founded, and since then it has formed a
consortium for research and private development of blockchain database usage in financial
services of over 80 major financial firms and technology companies, including Barclays, BBVA,
Commonwealth Bank of Australia, Credit Suisse, Goldman Sachs, J.P. Morgan, Royal Bank of
Scotland, State Street, and UBS (Lang 2015). Some of the members (Goldman Sachs, Banco
Santander, JP Morgan) have since left; however, the $107 million in financing R3 received in
May 2017 from major investors such as SBI Group, Bank of America Merrill Lynch, HSBC, Intel
and Temasek reflect strong support for the consortium (Shieber 2017, Kharpal 2017). The
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members who left did not necessarily leave because they gave up on the technology; instead,
some invested in competing blockchains. For example, J.P. Morgan is investing in its own
distributed ledger, called Quorum (Higgins 2017). J.P. Morgan is also one of the backers of the
Enterprise Ethereum Alliance (Higgins 2017). The Enterprise Ethereum Alliance supports
Ethereum, a blockchain-based platform that first incorporated smart contract (scripting)
functionality and now provides a popular alternative cryptocurrency token to bitcoin, “ether”
(https://en.wikipedia.org/wiki/Ethereum). Ethereum was proposed by Vitalik Buterin in a white
paper in 2013, and has soared in value since then (Durden 2017).
A push for standardization in the blockchain technology space is the Hyperledger
project, led by the Linux Foundation. The project was announced on December 17, 2015, and
was backed by 17 founding members. It now has over 130 members, including technology
companies such as IBM, consulting and professional services companies such as Accenture, and
financial services companies such as J.P. Morgan and the Depository Trust and Clearing
Corporation (DTCC). The goal of the project is to support open source blockchain-based
distributed ledgers and advance cross-industry blockchain technologies. (See also
https://en.wikipedia.org/wiki/Hyperledger.)
According to the results of a 2017 Chartered Financial Analysts’ survey (CFA Institute
2017), finance professionals do not envision blockchain as transformative within the next year.
However, a third believe that it will be the technology with the greatest impact on the industry

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within five years. Perhaps more importantly, other industries are beginning to realize that the
application of the blockchain technology is not limited to digital currency and financial services
as the technology can be used for open collaboration and exchange of any information. For

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example, Guardtime, a software security company, has developed a digital signature system
based on blockchain technology. In the healthcare space, Gem Co and Phillips have partnered
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to explore how the blockchain technology can help develop a patient-centric approach to
healthcare (https://gem.co/health/).
A major potential area of application for blockchain is in supply chain management,
where “[i]ntermediaries like distributors, retailers, transporters, storage facilities and suppliers
stand between the consumers and the products they use” (Thakkar 2017). Traditional supply
chain processes are often based on multiple bilateral links. Instead, ConsenSys is attempting to
use blockchain technology to build a “supply circle” that allows consumers to become
“prosumers,” that is, “consumers that are also producers” (Thakkar 2017).
The ability to track through a distributed ledger the true value of the products and
services customers purchase as well as potentially factors such as environmental damage, child
labor, and criminal activities that go into the manufacturing of products, can be disruptive for
the industry and lead to the formation of an open ecosystem for collaboration. According to Bill
Fearnley Jr., a research director at International Data Corp, “By creating a permanent record
that can’t be altered, blockchain is well-suited for tracking diamonds and other goods where
buyers want to know the origins and previous owners” (Nash 2016). For example, Everledger
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uses blockchain technology to provide provenance in the diamond trade (Hutt 2016).
Assetcha.in uses blockchain technology to create a secure marketplace for valuables and art
(Lundy 2017).
IBM has become one of the greatest supporters of the blockchain technology,
“developing code and hosting labs where customers can experiment with blockchain software”
(Nash 2016). Everledger was one of IBM’s first clients in this space. Another one of IBM’s clients
is Indian conglomerate Mahindra. IBM and Mahindra have formed a partnership to enable
trade finance transactions from suppliers to manufacturers. Mahindra is also researching how
to apply blockchain in the auto and agritech industries (Thakkar 2017).
Governments are embracing the blockchain technology, a curious development given
the technology’s origins as a platform in which no central authority is needed. Sweden, Georgia,
and Honduras have been exploring using blockchain for land registries (Hutt 2016), and Dubai
wants “distributed ledgers to power its entire government by 2020” (Ryder 2017).
Blockchain is a platform that enables peer-to-peer transactions and a true "sharing
economy" (De Fillippi 2017, Lundy 2017). Some predict that the blockchain technology will
eliminate the middleman in a variety of industries. As Lundy (2017) argues, real estate, legal
services, and e-commerce can all be replaced with lower cost blockchain-based services, and
“[r]ather than use Uber, Airbnb or eBay to connect with other people, blockchain services [will]

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allow individuals to connect, share, and transact directly.”

Applications of Blockchain in Accounting: Current Initiatives at the Big-4

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Accounting Firms
As explained earlier in this article, blockchain represents a distributed ledger system which is a
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shared collection of synchronized ledger records that can be seen by all the participants in the
network (Vaidyanathan 2017). A change made by a participant in this network would be
validated and reflected in everyone’s view of the ledger in one shared record (Vaidyanathan
2017). Significant efficiencies can be achieved when performance of a transaction occurs as a
single event with the recording of the transaction. This process eliminates the need to enter
and reconcile the information in multiple databases, which saves time by increasing the speed
of transactions and substantially reducing human error or fraud.
The discussion in the previous section illustrated that distributed ledger technology
applications are an emerging area with the power to disrupt digital transaction processing,
contracting, and stock trading (Watson and Mishler 2017). The benefits of blockchain in
accounting can be found in auditing through the establishment of a detailed audit trail, and the
ability to review exceptions generated from a population of transactions rather than a sample.
Also, distributed ledgers could provide an opportunity to conduct audits on a more frequent or
even continuous basis with an increased sense of trust because the technology would make it
impossible to modify any transactions before an audit (Vaidyanathan 2017). Some of the areas
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in accounting and auditing that would benefit from blockchain applications are (Baron 2017):

• “Traceable audit trails;

• Automated audit processes;
• Authentication of transactions;
• Tracking ownership of assets;
• Development of “smart contracts;” and,
• Registry and inventory system for any asset, ranging from raw materials to
intellectual property.”
To understand better the application of distributed ledger technology in accounting, we
explore the current blockchain-related practices in the largest players in the accounting
industry. Each of the Big-4 accounting firms (Deloitte, PwC, EY, and KPMG) has engaged in
research and development within the blockchain space. In August 2016, the four major
accounting firms met with the American Institute of Certified Public Accountants (AICPA) to
assess the potential establishment of a distributed ledger consortium with the goal to examine
blockchain solutions for the accounting industry (Del Castillo 2016). The accounting industry’s
response has been similar to that of the financial services industry, where R3, the distributed
database technology company, leads a consortium of financial institutions working on
blockchain solutions for the financial sector. The accounting industry consortium was hosted by
the ethereum-focused startup ConsenSys and generated substantial interest from the large
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accounting firms who view blockchain as an opportunity to create additional revenue streams
through assurance services and to explore potential efficiencies it can provide (Del Castillo
2016). More recently, in June, 2017, the Accounting Blockchain Coalition (ABC), an organization
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that educates its members on blockchain-related innovation in the accounting industry, hosted

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a “Blockchain, accounting, audit & tax conference” (Accountingblockchain 2017). The outcome
of the conference was the creation of five working groups with the goal of working with the
standard setters and assisting in developing accounting standards to regulate blockchain use
(Del Castillo 2017).
As blockchain and other disruptive technologies such as artificial intelligence and cloud
computing enter the accounting profession, AICPA has been closely following state legislative
agendas in the US to determine how they would influence the way CPA firms operate and use
technology (AICPA 2017). States like Arizona, Illinois, and Nevada have proposed legislation
covering blockchain in the course of 2017 legislative sessions (AICPA 2017). Moreover, the
AICPA has created the Assurance Services Executive Committee (ASEC) comprised of industry
and academic leaders with the goal to develop guidance and support innovation and
incorporation of emerging technologies to address developing assurance and advisory needs
(ASEC 2017).
Deloitte has set up a team, Deloitte Rubix, that is working solely on blockchain
applications in Deloitte’s Toronto offices. The focus so far has been on payments and rewards
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programs, and digital banking (Das 2017). In January 2017, Deloitte announced the opening of
its first blockchain lab in New York City, and its second blockchain lab in Dublin, Ireland, shortly
after. In February, 2017, Deloitte announced that it has performed a blockchain audit in which
it successfully applied existing auditing standards to examine a permissioned blockchain
application (Das 2017). In total, Deloitte’s blockchain practice consists of nine development
teams with over five hundred community members from thirty countries that have developed
over thirty blockchain use cases (Deloitte 2017).
More recently, Ernst & Young launched EY Ops Chain, which focuses on pricing, digital
contract integration, shared inventory information, invoicing and payments (Prisco 2017). EY
has also set up a Blockchain Lab in New York City to develop blockchain-based solutions for its
clients. The areas where blockchain could have an impact are: “clearing and settlement, trade
finance and supply chain management, closed economies and loyalty points, insurance claims
management, and Internet of Things (IoT) applications” (Prisco 2017).
PwC, through its DeNovo platform, offers proprietary blockchain content covering the
latest developments in the FinTech industry. PwC also offers guidance on how best to
implement blockchain in organizations by conducting detailed strategy assessments and
creating customized proof-of-value tests to show the viability of blockchain before full
implementation (PwC 2016). During implementation, PwC supports with designing, developing,
and testing of blockchain solutions, and provides third-party integration assistance (PwC 2017).

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Grainne McNamara, a principal with PwC, stated the following about blockchain applications:
“Supply chain is getting the most attention. Every single client we sit down with we can
absolutely find a [supply chain] use case that provides value to the client and their customers.”

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(Del Castillo 2017). Further, she summarized PwC’s blockchain practice as follows (ABC 2017):

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We have already demonstrated that a combination of blockchains and smart contracts
are incredibly useful to people in finance and operations functions. We have done field
proof of concepts where, for example, in the order-to-cash process we are able to
demonstrate using a blockchain on a smart contract infrastructure that we could track
from physical assets to the internet of things all the way through to cash. […] It is too
early to say that PwC itself has been transformed by blockchain, that would be quite a
statement. Of course, we are talking to our clients about how might we use blockchain
and associated technologies like smart contracts to help make finance functions more
efficient. We are also looking, of course, what it means for our audit business – there is
a disruption effect obviously. We are looking and asking how might we use technology
to audit this technology, what would constitute some of the controls that we are looking
for. We are also working with accounting standards bodies. Did anything in my internal
system of controls move to the blockchain, and what do I need to do to demonstrate
that I am still actually in compliance with accounting regulations? Those are some of the
activities that we have ongoing.
In March, 2017, PwC announced the backing of the Crypto Valley Association, a non-
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profit organization in Switzerland created to engage in blockchain research and public policy
outreach (Higgins 2017b). In June, 2017, PwC sponsored ID2020 event hosted by the United
Nations where representatives from both public and private sectors convened to examine how
blockchain startups could attempt to solve an issue of over a billion people with no legal
identity (Del Castillo 2017b).
In February, 2017, KPMG announced the creation of Blockchain Nodes in Frankfurt and
Singapore in partnership with Microsoft Corp. The goal of the nodes is to “create and
demonstrate use cases that apply blockchain technology to business propositions and
processes” (KPMG 2017). The focus is on creating prototype models to address blockchain
implementation challenges in the financial services industry as well as the healthcare and the
public sector.
Blockchain-related milestones in accounting and how they are positioned relative to the
milestones in blockchain adoption in different industries we discussed in the previous section
are shown in Figure 2.

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Figure 2. Milestones of development and adoption of the blockchain technology. Blue: major
technological advances; Gray: major developments in adoption in the financial sector; Green:
major developments in adoption in the supply chain and healthcare sectors; Red: major
developments in adoption by accounting firms. Compiled from Hewlett Packard Enterprise
(2016), Mann (2016) and several other sources.

III. DISCUSSION AND OPPORTUNITIES FOR FUTURE

RESEARCH
Some of the most interesting issues surrounding the distributed ledger technology can be found
in the space of data sharing. Even though the use of blockchain in accounting is still in its
infancy, it is important to monitor the progress of blockchain implementation in organizations
in order to examine how organizations determine whether to place data in a shared
environment or to encrypt it; or how organizations achieve a balance between data
transparency and privacy. As Jake Benson of Libra stated at the ABC conference, “This is one of
the most interesting things about this space. There will be new best practices on what type of
data and processes belong on blockchain and what types do not” (ABC 2017).
Another area that future research could explore is the efficiencies achieved through
blockchain use. Where do blockchain applications create the greatest efficiencies, prevent
fraud or reduce waste? For example, in a supply chain goods entering the blockchain could be

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marked with an identifier that would provide for an opportunity to check those goods against
their initial values throughout the entire process and identify any discrepancies (Benson 2017).
How would increased transparency in the supply chain and ability to monitor transactions in

accepted
real-time change managerial accounting practices? How would systems of operational
performance management and measurement change because of blockchain?
In the context of auditing, accountingmanuscript
researchers should examine how to develop a
triple-entry accounting system that enables blockchain technology to be an intermediary that
automates transaction storage and verification (Dai and Vasarhelyi 2017). Auditing researchers
should also examine ways to develop internal controls for blockchain applications and
understand their auditability, and ways to incorporate internal control protocols, “smart
controls,” into smart contracts (Dai and Vasarhelyi 2017). In the context of forensic accounting,
an interesting area of exploration would be to examine whether public blockchains bypass any
of the anti-money laundering regulations (ABC 2017). In the area of taxation, the application of
blockchain in transfer pricing seems to be the most promising (ABC 2017). From the regulators’
perspective, it is important to understand the emerging governance structure surrounding the
blockchain ecosystem and explore ways to regulate resulting products, services, activities, and
entities, while promoting responsible innovation practices (ABC 2017). Also, it is important for
researchers to monitor how blockchain and other emerging technologies alter the nature of
accountants’ jobs over time. What new tasks will this technology enable accountants to
perform and which tasks will disappear? How will accountants work alongside this technology?
 P a g e | 15

Accounting firms appear optimistic about the potential of the distributed ledger technology and
foresee that its impact will be noticeable in the near future.

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