250 words Synopsis

Accounting and Auditing at the Time of Blockchain Technology:
A Research Agenda

Jana Schmitz , RMIT University, Melbourne

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Giulia Leoni∗, RMIT University, Melbourne

Blockchain is a distributed ledger technology expected to have significant impacts on the accounting and auditing
profession. This study, applicable and timely for both accounting and auditing scholars and practitioners,
explores blockchain technology and its main implications for the accounting and auditing profession. The
research question addressed in this study is: What are the major themes emerging from academic research
and professional reports and websites debating blockchain technology in the accounting and auditing context?
A literature review of academic literature and professional reports and websites is performed to identify
a taxonomy of emerging themes. The study finds that the most discussed themes in scholarly works and
professional sources are governance, transparency and trust issues in the blockchain ecosystem, blockchain-
enabled continuous audits, smart contract applications and the paradigmatic shift in accountants’ and
auditors’ roles. Based on these four themes, practical implications for accountants and auditors on how to
approach the blockchain development are provided. Moreover, this study offers suggestions for future research
on accounting and auditing in the blockchain era.

B
lockchain technology (BT) – also known as
distributed ledger technology (DLT) – is a system
in which transaction records stored in blocks are

maintained across several computers linked to a peer-to-
peer network that uses algorithms to verify transactions
(Coyne and McMickle 2017; Dai and Vasarhelyi 2017;
Kokina et al. 2017).1 BT is the technology behind the
cryptocurrency Bitcoin and has been referred to as one
of the most fundamental disruptive innovations and
impactful technologies developed in recent years (Swan
2015; Peters and Panayi 2016; Tapscott and Tapscott
2016; Tan and Low 2017). More precisely, BT has been
forecasted to be a game-changer in various industries,
with the potential to transform contemporary business
models and the structure of markets (Deloitte 2016a;
Casey and Vigna 2018a). While BT has already begun
to demonstrate its disruptive influence on different
industries such as financial services, agriculture, trade,
healthcare, transportation as well as government (Ølnes
et al. 2017; Tan and Low 2017; Yermack 2017), it is
also expected to strongly impact on the accounting and
auditing profession in the future (Coyne and McMickle
2017; CPA and AICPA 2017; Dai and Vasarhelyi 2017;
Kokina et al. 2017; Rückeshäuser 2017; Yermack 2017).
Dai and Vasarhelyi (2017: 5–6) argue that ‘[b]lockchain’s
functions of protecting data integrity, instant sharing
of necessary information, as well as programmable and
automatic controls of processes, could facilitate the
development of a new accounting ecosystem’.

Furthermore, recent reports by the Big 4 audit firms
suggest that accountants and auditors, regulators and

standard setters will be significantly affected by BT
(Deloitte 2016a; KPMG 2016a; PwC 2016, 2017a;
EY 2017), especially with regards to record-keeping
processes, including the way transactions are initiated,
processed, recorded, reconciled, audited and reported
(Fuller 2016; ACCA 2017; CPA and AICPA 2017; Coyne
and McMickle 2017).

BT is not considered a passing trend, but a paradig-
matic change in the recording and management of
transactions (Carlin 2017; CPA and AICPA 2017; Dai
and Vasarhelyi 2017). Like every innovation, BT can be
interpreted both as an opportunity and a threat. On the
one hand, some authors claim that BT has the potential
to make accounting information more trustworthy and
timelier by providing a better alternative to current
accounting and auditing systems (e.g., Coyne and
McMickle 2017; Kokina et al. 2017). On the other hand,
given its potential to automate certain accounting and
auditing processes, BT is also feared as a threat to the
status quo of the profession of accountants and auditors,
their practices and traditions (Tapscott and Tapscott
2016; Casey and Vigna 2018a).

∗Currently at Università degli Studi di Genova.
[Correction added on 25 April 2019, after first online publication:
current institution of author Giulia Leoni has been added.]

Correspondence: Jana Schmitz, RMIT University, 124 La Trobe
Street, Melbourne VIC 3000, Australia. email: jana.schmitz@rmit.
edu.au
Accepted for publication 23 February 2019.

Australian Accounting Review No. 89 Vol. 29 Issue 2 2019 doi: 10.1111/auar.12286 331

https://orcid.org/0000-0003-4293-4920

Accounting and Auditing at the Time of Blockchain Technology J. Schmitz & G. Leoni

Accounting academia is only now beginning to ad-
dress this issue as only a few scholars have entered the
academic domain of BT (e.g., Fanning and Centers 2016;
Ram et al. 2016; Dai and Vasarhelyi 2017; Kokina et al.
2017; O’Leary 2017; Rückeshäuser 2017; Tan and Low
2017; Yermack 2017; Chedrawi and Howayeck 2018;
Kozlowski 2018). Thus, the opportunities and challenges
of BT for the accounting and auditing profession are still
under-investigated and empirical evidence is yet to be
provided (Carlin 2017; Dai and Vasarhelyi 2017).

This study aims to explore BT and its main impli-
cations for accountants and auditors by systematising
academic studies and professional reports and websites
that explore BT in the accounting and auditing field.
By reviewing and analysing the most recent academic
literature and professional sources, the study provides
an overview of emerging themes relevant for future re-
search and practice. By doing so, this study makes three
major contributions. First, it is one of the very first stud-
ies to provide a systematisation of BT research in the
accounting and auditing context to offer an overview of
this innovation to practitioners and academics, as well
as to policymakers and regulators. Second, it provides
an overview of how accounting and audit practices may
change and be impacted by BT. This overview supports
both current and future accountants and auditors in how
to approach the fast-moving blockchain advancement.
Third, by synthesising existing academic literature and
professional reports and websites, this study also pro-
vides a roadmap containing suggestions for potential
research questions and future research avenues.

The study commences as follows: the next section pro-
vides insights into the features of BT and outlines what
the technology means for accounting and auditing. Fol-
lowing the elaboration on BT, the employed research
methodology is presented. Thereafter, the results emerg-
ing from the review of academic and professional sources
are presented. This section includes the identification
and examination of the four major themes. The conclud-
ing section provides a summary of findings, implications
for practitioners and avenues for future research.

Blockchain Technology: What It Is and
What It Means for Accounting and
Auditing

BT has been described as an internet-based peer-to-peer
network technology that uses cryptography. Peer-to peer
networks use a distributed application architecture that
allocates and shares tasks among peers participating in
the network. This network structure presupposes that all
participants engage in tasks and decision making. More-
over, all network participants maintain an identical copy
of the ledger in which information is recorded. Those
ledgers contain all transactions made since the creation

of the ledger (CPA and AICPA 2017). Ledgers can be non-
distributed or distributed. In a non-distributed ledger,
every record is saved in a single location (e.g., a single
computer) and can be modified by users by accessing,
amending and overwriting the original file. As opposed
to non-distributed ledgers, in a distributed ledger net-
work like blockchain, every record is saved in multiple
locations across the network. Therefore, no user in the
network can unilaterally modify the record as it is stored
in multiple copies on multiple independent computers
within a decentralised network (Tan and Low 2017;
O’Leary 2018). This creates distributed control within
the network, as no single peer (individual, group or
institution) controls the ledger.

BT provides a technological replacement of the
trusted party needed to verify transactions by offering a
triple-entry ledger system that provides authentication
transparency (Dai and Vasarhelyi 2017; Yermack 2017;
O’Leary 2018).2 However, BT does not simply add a
third ledger to the traditional double-entry bookkeeping
approach but adds a shared ledger. Instead of keeping
separate transaction records (double-entry bookkeep-
ing), the blockchain ledger records accounting entries
for both transacting parties. This creates an interlocking
system of enduring accounting records (O’Leary 2018),
where trust moves from an external authority to all
participants in the blockchain network (ICAEW 2017;
Tan and Low 2017). Because all network participants
have access to the same set of shared ledger records at any
time, any single change of the ledger (i.e., transferring as-
sets to another participant in the network) is made visible
to everyone on the network (ACCA 2017). Changes can
only be made if the rules dictated by the consensus proto-
col are followed. The consensus protocol takes the form
of mathematical algorithms and needs approval from
network participants to effectively action the change.
Without the consensus, the network automatically
rejects the ledger entry (Coyne and McMickle 2017; Dai
and Vasarhelyi 2017; Kozlowski 2018). Different consen-
sus protocols exist that must be distinguished between:
public and permissionless blockchains that are publicly
accessible and private and permissioned blockchains
that only grant access to selected individuals or groups
(Yermack 2017). Public, permissionless blockchains
are visible and accessible to everyone who wishes to
view them. On the contrary, private, permissioned
blockchains are similar to traditional transaction ledgers,
where only authorised users with granted permission
can view the contents (Coyne and McMickle 2017;
Yermack 2017). To this type of blockchain external audi-
tors have to be granted access to conduct audits (O’Leary
2017).

Given its distributed nature and its consensus mecha-
nism, BT provides a novel solution to control the ledger
of recorded transactions. Every new record is added to
existing blocks to form a chain that is cryptographically

J. Schmitz & G. Leoni Accounting and Auditing at the Time of Blockchain Technology

linked. Because of this chain-shaped link, any attempt
to make changes to previous transactions would require
the reprocessing of all subsequent blocks on the chain
at a rate faster than that at which new blocks are added.
As this is technically impossible, BT is immutable and
considered as fraud unattainable (Coyne and McMickle
2017; Dai and Vasarhelyi 2017; O’Leary 2017; Yermack
2017). As a result, BT is said to overcome the limits of
double-entry bookkeeping such as the need for external
assurance on companies’ financial statements and the
potential for fraud.3

Research Methodology

Since BT only recently emerged as a new area of research,
scholars have based their studies predominantly on pro-
fessional literature, online sources and reports published
by early adopters of the technology. Hitherto, the number
of academic publications from different research fields
is limited and a comprehensive review of BT literature
on accounting and auditing topics has not yet been con-
ducted. Nevertheless, with the growing scholarly interest
in BT and its potential economic and societal impacts,
an increasing number of publications in the accounting
and auditing field recently started to emerge, advancing
scientific rigour.

This growing number of academic publications ad-
dressing BT in the accounting and auditing domain of-
fers an opportunity to explore and discuss the results
from these academic as well as professional literatures, to
provide implications for accounting and auditing prac-
titioners and to suggest avenues for future research. To
determine the main issues, themes and topics relating
to BT debated in the academic and professional litera-
tures, in this study a systematic review of professional re-
ports, websites and academic publications in accounting
and auditing was performed. The investigation entailed
two different phases, presented below. First, a search
and review of academic studies, professional reports and
websites addressing BT in the accounting and auditing
context was performed, followed by a thematic analysis
to identify the main themes emerging from the existing
research, reports and websites.

Review of academic literature and professional
sources

In this study, we focus on this emerging academic liter-
ature as well as professional publications and websites
addressing BT in the accounting and auditing industry.
At the first stage of this study’s investigation we per-
formed a systematic review of academic publications to
collect academic studies on BT in the accounting and au-
diting field. The period under study ranges from 2008–
2018.4 We sourced relevant publications by launching a

Table 1 Initial Google Scholar search results

Key search term combinations Number of hits

‘blockchain’ and ‘accounting’ 68
‘blockchain’ and ‘auditing’ 15
‘distributed ledger technology’ and ‘accounting’ 189
‘distributed ledger technology’ and ‘auditing’ 25
Total 297

keyword search on Google Scholar. Given that the terms
blockchain and distributed ledger technology are used syn-
onymously, both terminologies were applied in this lit-
erature search. The employed keyword combinations are
listed in Table 1. This search provided an initial pool of
297 academic sources.

From this initial pool, only peer-reviewed academic
journal articles or book chapters written in English were
considered. After eliminating conference papers, book
reviews and newspaper articles, we obtained a total
of 79 publications. In order to ensure selecting only
those sources addressing the relevant research domain,
Cockcroft and Russell (2018) recommend conducting
a comprehensive screen of search results, through
which sources covering unrelated topics are filtered
out. Adopting the authors’ approach, we reviewed
journal article abstracts and introductory sections of
book chapters in all 79 publications to exclude those
publications whose content was not related to BT in the
accounting and auditing domain. Following this pro-
cess, we excluded book chapters and journal articles that
mention BT in the context of research fields irrelevant
to this study, such as the health sector, capital markets,
agriculture and supply-chain management. Moreover,
we excluded those sources that only mention BT and/or
DLT and accounting and/or auditing without engaging
in the accounting and/or auditing context. This resulted
in a total of 16 academic publications that explicitly
address BT in the accounting and auditing space.
The list of selected academic sources is presented in
Table 2.

Owing to the limited amount of scholarly work on
BT in the accounting and auditing domain, we further
searched for professional reports and websites of the
major professional accounting and audit firms and
associations worldwide. This step was undertaken to
provide a more comprehensive picture of the current
development of practical applications of BT in the ac-
counting and auditing industry. Exploring practitioners’
views and perceptions of BT helped us to understand
the potential BT holds for accountants and auditors and
how the technology may affect the profession. Indeed,
we argue that the debate of industry leaders and early
adopters provides valuable insights into the future of
the BT innovation (Bjørnenak 1997; Malmi 1999).
We defined the main professional accounting bodies

Accounting and Auditing at the Time of Blockchain Technology J. Schmitz & G. Leoni

Table 2 Themes emerging from blockchain studies in the accounting and auditing field

No. Author(s) and year Governance, transparency and trust Continuous audit Smart contracts Roles of auditors

1 Atzori (2017)
√

2 Coyne and McMickle (2017)
√ √ √

3 Dai and Vasarhelyi (2017)
√ √ √ √

4 di Fiammetta (2017)
√

5 Fanning and Centers (2016)
√

6 Kokina et al. (2017)
√ √ √

7 Kozlowski (2018)
√ √ √

8 O’Leary (2017)
√ √

9 O’Leary (2018)
√ √

10 Ølnes et al. (2017)
√

11 Peters and Panayi (2016)
√ √

12 Rooney et al. (2017)
√ √

13 Rozario and Vasarhelyi (2018)
√ √ √

14 Rückeshäuser (2017)
√ √

15 Wang and Kogan (2018)
√ √

16 Yermack (2017)
√ √ √

recognised at international level, that is, Chartered Pro-
fessional Accountants Canada (CPA Canada), American
Institute of Certified Public Accountants (AICPA),
Chartered Accountants Australia and New Zealand (CA
ANZ), Association of Chartered Certified Accountants
(ACCA) and Institute of Chartered Accountants in
England and Wales (ICAEW) as leaders, and the Big
4 audit firms, PwC, Deloitte, KPMG and EY, as early
adopters.5

To identify professional sources most pertinent to
addressing the study’s objective, we employed purposive
sampling of global accounting bodies’ and Big 4 audit
firms’ reports and websites (Kim and Kuljis 2010).
All relevant online sources were retrieved from the
websites of CPA Canada, AICPA, CA ANZ, ACCA,
ICAEW, PwC, Deloitte, EY and KPMG. We obtained
an initial web-based search result of 98 online sources
consisting of reports and websites. Similar to the aca-
demic literature search, the selection of online sources
considered as relevant for this study was conditioned
by their coverage of BT-related issues in the field of
accounting and auditing. Therefore, online sources that
mentioned blockchain and/or distributed ledger technol-
ogy in the context of topic areas other than accounting
and auditing, such as, for instance, identification,
land registry, insurance, legal matters or supply-chain
management, were eliminated from the initial search
result of 98 online sources. This web-based analysis
resulted in a purposively selected sample of a total of 20
publicly available sources in website and report format
(see Table 3).

The selection of a relatively small sample is aligned
with approaches adopted by Unerman (2000) and Kim
and Kuljis (2010), who claim that rather than superfi-
cially examining a large-scale sample of multiple web-
based sources, a focused sample smaller in size allows
for greater insights into key themes and the underlying
strategic agendas of professionals.

Thematic analysis of academic literature and
professional reports and websites

Our analysis entailed the coding of the 16 academic
publications and 20 professional reports and websites.
Coding and related thematic analysis helped us to
understand the focal issues emerging from the data and
to discover themes pertinent to the phenomenon under
study (Boyatzis 1998; Fereday and Muir-Cochrane
2006; Bowen 2009). Codes emerging from the review of
academic literature were iteratively compared with codes
identified through the analysis of professional reports
and websites (Bowen 2008). The constant comparison of
purposively sampled sources allowed us to test identified
codes with a view to developing themes. Whenever
new codes suggested new themes during the analytical
process, previously scrutinised sources were re-assessed
(Bowen 2008). The two authors performed the coding
process separately and subsequently compared their
theme lists to identify common themes, discuss differ-
ences and reach consensus on the main themes (Parker
and Roffey 1997). The discussion and comparison
of themes has demonstrated that the coding process
culminated in a saturation point, where more and new
data did not provide new information but ensured repli-
cation of identified themes (Bowen 2008). This iterative
analytical process resulted in the creation of a list of four
key themes revolving around BT’s effects on the account-
ing and auditing profession. The key themes are (1)
governance, transparency and trust, (2) continuous audit,
(3) smart contracts and (4) accountants’ and auditors’
roles, which are discussed in the following section.

Results from the Thematic Analysis

The forthcoming sub-sections are structured around
the four key themes that emerged from the thematic

J. Schmitz & G. Leoni Accounting and Auditing at the Time of Blockchain Technology

Table 3 Themes emerging from purposively selected professional reports and websites

No. Author(s) and year Governance, transparency and trust Continuous audit Smart contracts Roles of auditors

1 ACCA (2017)
√ √ √

2 CA ANZ (2017)
√ √ √

3 CPA Canada (2016)
√ √ √

4 CPA and AICPA (2017)
√ √ √ √

5 Deloitte (2015)
√

6 Deloitte (2016a)
√ √ √

7 Deloitte (2016b)
√ √

8 Deloitte (2018)
√

9 EY (2016)
√ √

10 EY (2017)
√

11 Hileman and Rauchs (2017)
√ √

12 ICAEW (2017)
√ √

13 KPMG (2016a)
√

14 KPMG (2016b)
√

15 KPMG (2018a)
√

16 KPMG (2018b)
√

17 PwC (2017a)
√

18 PwC (2017b)
√ √

19 PwC (2018a)
√

20 PwC (2018b)
√

analysis. Each sub-section presents the main contents
of analysed academic publications and professional
reports and websites and elaborates on key issues.

Governance, transparency and trust

Casey and Vigna (2018a) refer to blockchain as a ‘truth
machine’ that contains all the necessary tools to establish
unprecedented levels of trust and transparency. Owing
to its distributed and decentralised nature, BT takes
accounting and auditing into a peer-to-peer domain
with no institutional intermediation (Atzori 2017).
BT provides distributed data security, transparency
and immutability (di Fiammetta 2017). According
to several scholars, the above features could greatly
improve accounting and auditing practice and could
force auditors and accountants to make a considerable
shift towards more transparent behaviour (Rooney et al.
2017; Yermack 2017).

BT allows companies to write transactions into the
blockchain, whereby immutable accounting records are
created. Manipulating or destroying those transaction
entries in an attempt to falsify or eliminate them is prac-
tically impossible because they are cryptographically
sealed and distributed (Deloitte 2015, 2016a; KPMG
2016a; Hileman and Rauchs 2017). Several publications,
reports and websites emphasise how immutability
becomes the key to accountability as blockchains allow
participants to view encrypted transactions and ensure
that they are kept updated and synchronised (Deloitte
2016b; KPMG 2016b; CPA and AICPA 2017; Atzori
2017; di Fiammetta 2017; Yermack 2017; PwC 2017b).
As a result, BT is deemed to significantly improve gover-
nance and transparency by providing shareholders and

stakeholders with immediate access to accounting data,
thereby providing them with a true and fair view of data
that are inherently trustworthy (Atzori 2017; Yermack
2017). Given its scalable and modular structure, BT –
particularly private, permissioned blockchains – offers
the possibility to create differentiated access to informa-
tion for stakeholders and shareholders, who usually have
different needs for accounting information (Yermack
2017). For instance, CFOs and auditors require access to
the full range of accounting data while accounts payable
clerks only need accounting information related to
accounts payable transactions, and investors may only
make use of aggregated accounting information.

The enhanced level of transparency in combination
with the verifiable nature of BT are likely to increase
shareholders’ and stakeholders’ trust (Deloitte 2015; CA
ANZ 2017; Hileman and Rauchs 2017). BT may also
provide the opportunity to disclose off-book transac-
tions and hidden accounts, which has profound im-
plications for accountability and transparency as well
as for companies’ competitive stance and compliance
to rules (Tapscott and Tapscott 2017). Attention must
be paid to the issue of transaction verification (Coyne
and McMickle 2017; Dai and Vasarhelyi 2017), because
the simple recording of data on the blockchain does
not imply that the transaction has happened in the
real world: ‘Just because a transacted record is com-
puterized and “blockchained” does not necessarily im-
ply that its physical world counterpart material of com-
merce has not been tampered with’ (Apte and Petrovsky
2016: 77).

In other words, only because an asset transfer has
been recorded on a blockchain does not guarantee that
the asset has been transferred or exchanged, payments
have been made and transactions have been recorded in

Accounting and Auditing at the Time of Blockchain Technology J. Schmitz & G. Leoni

the real world. Hence, some accounting scholars have
criticised blockchain verification methods for not be-
ing able to sufficiently validate transactions (Coyne and
McMickle 2017). Therefore, companies using BT in con-
junction with offline payments have no guarantee that
the transaction occurred in the real world. However,
for the accounting experts, this is an important aspect
they can contribute to by researching mechanisms to
reconcile blockchain-recorded transactions and actual
payments (CA ANZ 2017; CPA and AICPA 2017).

Finally, researchers raise concerns about blockchains
being ‘fraud free’ (Coyne and McMickle 2017;
Rückeshäuser 2017; Wang and Kogan 2018). Indeed,
committing fraud is still possible on blockchains, as ‘lies
encoded on the blockchains are still lies. They’re just im-
mutable lies’ (Bradbury 2015). Arguing that BT is unable
to detect fraudulent transactions if those transactions
were fraudulent from the beginning, researchers alert
practitioners that the capability of BT to prevent fraud
may be overestimated and overhyped (Rückeshäuser
2017). However, although BT cannot eliminate fraud
completely, it may help identify fraud in real time (Wang
and Kogan 2018).

Continuous audit

Contemporary audit practice is labour intensive. At
the beginning of each audit auditors receive journal
entries, spreadsheet files and other documents both in
electronic and manual formats. Before the actual audit
process begins auditors are required to invest significant
time into the preparation of data and planning of the
audit. This lengthy process comes at the sacrifice of
efficiency and cost-effectiveness (Deloitte 2016a; CPA
and AICPA 2017; CA ANZ 2017; Rückeshäuser 2017;
Kozlowski 2018). Whereas contemporary audits require
the approval of transactions and balances at the end of
reporting periods, blockchains provide validated trans-
action records almost immediately (CPA Canada 2016;
Rooney et al. 2017; Wang and Kogan 2018). Through the
instantaneous confirmation of transactions, BT enables
continuous auditing, also termed ‘real-time auditing’.
EY (2017) describes auditing in the blockchain era
as plug-in, always-on audit, emphasising that external
auditing transitions from a periodical or annual exercise
to a continuous matter. Monitoring what happens in real
time is a substantial departure from contemporary audit
practice, which is focused on investigating what hap-
pened in retrospect. Continuous auditing eliminates the
traditional audit concept of sampling as BT offers an up-
to-date, immutable historical record of all transactions
(CPA Canada 2016; CA ANZ 2017; PwC 2017a, 2018a;
Rooney et al. 2017). By combining the processing of
transactions with the recording and reconciling of those
transactions, BT introduces substantial efficiencies (EY

2016; ACCA 2017; CPA and AICPA 2017; Kokina et al.
2017; PwC 2018a, 2018b). Precisely, the need for entering
and reconciling accounting data in multiple databases is
eliminated, whereby time is saved and the risk of human
error is substantially reduced (Kokina et al. 2017).

Several analysed reports indicate that the increased au-
ditability of accounting information is one of the major
benefits of BT (Fanning and Centers 2016; ACCA 2017;
CPA and AICPA 2017; O’Leary 2017). As BT provides
a real-time audit trail, auditing is not only made signif-
icantly simpler but also considerably cheaper (Fanning
and Centers 2016; Deloitte 2016b; CPA and AICPA 2017;
EY 2017; PwC 2017b). Auditors can operate more effi-
ciently and effectively due to the reduced time spent on
reconciling and disputing records with clients (Rozario
and Vasarhelyi 2018). Beyond that, it is assumed that
continuous auditing makes it simpler for auditors to
investigate fraud since the real-time systems highlight
anomalies at the time of occurrence allowing for timely
investigations (Deloitte 2016a; EY 2017).

Further, BT-enabled continuous auditing could en-
hance auditors’ understanding of clients’ businesses as
the engagement between auditors and clients is no longer
limited to the end-of-financial-year reporting period
(ACCA 2017). However, a comprehensive continuous
audit is unlikely to be achieved unless companies de-
cide to record all transactions on the blockchain. With
only particular transactions being encoded, the promises
of continuous auditing can only partially be delivered
(O’Leary 2018). BT does not only allow for the timely
examination of transactions but also for automation of
transaction recording and verification. In this regard,
reference has been made to smart contracts that enable
efficient control of transaction and recording processes
(Dai and Vasarhelyi 2017; Kozlowski 2018; Rozario and
Vasarhelyi 2018).

Smart contracts

An implicit process in accounting and auditing is the in-
volvement of the human element in all steps. However,
the necessity for the human function may change with
blockchain development. BT can carry not only transac-
tional data in real time but can also carry a programmed
version of human action. These take the form of so-
called smart contracts, which encode relevant terms into
a blockchain and execute automatically when predefined
conditions are met (Coyne and McMickle 2017; Ølnes
et al. 2017; KPMG 2018a; Rozario and Vasarhelyi 2018).
Smart contracts digitally facilitate, verify, control and
enforce transactions. Smart contracts are executed by
a computer network that uses consensus protocols to
agree upon the sequence of actions specified in a contract
(CPA Canada 2016; Peters and Panayi 2016; Hileman and
Rauchs 2017; Deloitte 2018).

J. Schmitz & G. Leoni Accounting and Auditing at the Time of Blockchain Technology

Before the emergence of BT, the execution of smart
contracts was impossible due to business parties main-
taining separate databases. With a shared database run-
ning a blockchain protocol, smart contracts auto-execute
with reduced risk of error or manipulation and no need
for a third-party intermediate (Dai and Vasarhelyi 2017;
Yermack 2017; Rozario and Vasarhelyi 2018). Smart con-
tracts basically extend blockchains’ utility from simple
record-keeping of transaction entries to automatically
implementing terms of multiparty agreements (CPA
Canada 2016; Deloitte 2018). For accountants and au-
ditors, smart contracts are said to play a significant role
as they allow for the autonomous recording of trans-
actions in compliance with agreed terms (ACCA 2017;
CPA and AICPA 2017; Dai and Vasarhelyi 2017; ICAEW
2017; Yermack 2017; Kozlowski 2018; O’Leary 2018). If
rules such as record sales after shipment of goods are pro-
grammed into smart contracts, the system automatically
reviews and verifies the shipment date before recording
sales onto the blockchain (Dai and Vasarhelyi 2017).

Rozario and Vasarhelyi (2018) propose that external
auditors make use of smart contracts (see also Rozario
and Thomas 2017). According to the authors, smart
contracts can facilitate the execution of audit processes
by automating the transaction reconciliation procedure
while providing more transparency to stakeholders
through close to real-time audit reporting. The auto-
mated reconciliation of transactions does not only save
time but also substantially reduces the risk of human
error (Kokina et al. 2017; Rozario and Vasarhelyi 2018).
However, in this regard it must be noted that it is
unlikely that every transaction will be audited by BT
smart contract procedures and undergo automated data
reconciliation. Complex accounting entries such as the
valuation of fair value or accounting measurements
such as impairment testing require human expertise and
judgement by accountants and auditors. Hence, Rozario
and Vasarhelyi (2018) suggest a holistic audit model con-
sisting of a hybrid of blockchain smart audit procedures
and audit procedures performed outside the blockchain.

Artificial intelligence (AI) technologies may extend
the potential of smart contract applications to the as-
sessment and recording of the physical conditions of
goods. In combination with AI, smart contracts could
detect and measure damage on inventory and other as-
sets and potentially automate the accounting measure-
ment of those assets. For instance, when shipped goods
are equipped with special sensors or chips, those sensors
or chips could self-report inventory damage and signal to
smart contracts to immediately adjust the correspond-
ing accounting measurements (Dai and Vasarhelyi 2017;
Kozlowski 2018).

Kozlowski (2018) recommends embedding account-
ing standards into the blockchain infrastructure by
encoding them into smart contracts. As part of the
continuous audit, auditors could then monitor whether

transactions are compliant with those accounting rules
and highlight cases of mismatch. Smart contracts can
revoke transactions if the system detects that rules and
standards encoded into the contract are disobeyed (CPA
Canada 2016; Deloitte 2016a). Besides the automation
of recording transactions, smart contracts may offer a
predicting function, for instance by encoding default
or credit rating prediction models (Dai and Vasarhelyi
2017). Those models would be able to monitor debtors’
default risk based on the evaluation of their financial
status and purchase behaviour, and adjust bad debt
estimations accordingly, when necessary.

Accountants’ and auditors’ roles

From the analysis of academic studies, professional
reports and websites we found that the argument of
auditors becoming obsolete as a consequence of the
blockchain development receives strong support and
enjoys increasing popularity. A substantial body of
academic works predicts several negative effects on the
accounting and auditing profession and considers the
disruption of the entire industry as possible (Peters and
Panayi 2016; O’Leary 2017; Yermack 2017; Casey and
Vigna 2018a). More precisely, claims have been made
that the accounting and auditing profession is at risk
due to the automation of reconciliation and that those
who keep the accounting books as well as those who
audit them will lose their jobs (Casey and Vigna 2018a).

Auditors enhance trust and confidence in the infor-
mation of the companies they audit and thereby sup-
port the functioning of global capital markets. The ar-
gument that auditors become obsolete as they can be
replaced by blockchains is based on the assumption that
transactions themselves can be trusted. The trust that
a blockchain-based accounting system may provide is
solely that the transaction has occurred. As outlined ear-
lier, blockchains do not provide a guarantee for transac-
tions taking place in the real world. Even if they are
recorded onto blockchains, transactions may still be
fraudulent, illegal or unauthorised. As underlined by
CPA and AICPA (2017), transactions might be executed
between related parties, linked to a side agreement or
incorrectly classified. Hence, given the need for audi-
tors to detect and investigate transaction errors or fraud,
the argument of auditors becoming obsolescent is not
evident.

In addition, BT cannot replace the extensive account-
ing knowledge required to determine whether ledger en-
tries have been made correctly (Coyne and McMickle
2017). For example, BT is not capable of preventing
asset misappropriation, erroneous measurement or esti-
mation of valid transactions (EY 2016; ACCA 2017; CPA
and AICPA 2017; ICAEW 2017). As a result, both schol-
ars (e.g., Coyne and McMickle 2017; Dai and Vasarhelyi

Accounting and Auditing at the Time of Blockchain Technology J. Schmitz & G. Leoni

2017; Kokina et al. 2017; Kozlowski 2018; Rozario and
Vasarhelyi 2018) and professional accounting bodies and
Big 4 audit firms (e.g., EY 2016; ACCA 2017; CA ANZ
2017; CPA and AICPA 2017; KPMG 2018b) agree that
accountants and auditors will not become redundant.

Moreover, it is unlikely that companies will store all
their transactions on blockchains. Recent studies have
shown that organisations currently employing BT record
only certain transactions (related to accounts receivable
and accounts payable accounts) on blockchains. As
those organisations will continue to make use of internal
Enterprise Resource Planning (ERP) systems (CPA
Canada 2016; Dai and Vasarhelyi 2017; Ortmann 2018),
they will still be dependent on internal and external
auditors to verify their accounts. Although accountants
and auditors are not going to become redundant, their
roles are likely to change due to the shift in the recording
and reconciliation of transactions from a manual to a
progressively automated procedure. Thus, BT is likely
to foster the reengineering of accountants’ and auditors’
roles. A new generation of accountants and auditors –
equipped with skills to operate in the new blockchain
ecosystem – may be required to respond to the change of
the current accounting and auditing paradigm (ACCA
2017; CPA and AICPA 2017; KPMG 2018b).

Concluding Remarks

The current blockchain hype sets researchers and practi-
tioners in motion to critically examine the core features
of BT and its impacts on accounting and auditing
practices. This study is a timely investigation that reveals
the main accounting and auditing areas on which BT is
expected to impact. We provide an initial but structured
overview of the academic and professional literature
that has considered the interactions between BT and the
accounting and auditing profession.

Summary of findings

The analysis of the literature, reports and websites has
revealed four main themes debated by scholars and
professionals: (1) governance, transparency and trust, (2)
continuous audits, (3) smart contracts and (4) accoun-
tants’ and auditors’ roles in the emerging blockchain
ecosystem. For each theme, we discussed the main con-
tents and elaborated on BT’s potential benefits and draw-
backs. One of the greatest advantages of BT emphasised
by accounting and auditing academics and practitioners
is that the technology increases the efficiency of record-
ing, reconciling and auditing of accounting data. At the
same time, BT allows accountants and auditors to save
costs and time executing these tasks and reduces the risk
of human error. However, in contrast to such benefits,
scholars and professionals have also identified potential

limitations. For instance, while BT is a promising tech-
nology for increasing trust between transacting parties,
its ability to detect fraudulent transactions is limited.
Some argue that unless companies record all transactions
on blockchains, the technology will only provide limited
benefits. Overall, we have found that the perspectives
of researchers and practitioners appear to be diverse
and neither group seems to be explicitly favourable or
unfavourable towards blockchain development.

Implications for accountants and auditors

The accounting profession has come a long way from
single-entry bookkeeping to the present-day develop-
ment of BT, which is said to disrupt the accounting and
auditing industry. Despite several concerns and predic-
tions about how new technologies will marginally affect
or eliminate accountants and auditors, historically these
professions have always remained consistent. Given that
BT has gained momentum only recently and still lags be-
hind with regards to practical adoption, the blockchain
development in an accounting and auditing context must
be viewed critically. It is not feasible at this stage to fully
project the impacts BT may have on accounting and
auditing. Nevertheless, based on the debate in the aca-
demic literature and professional reports and websites,
this study has identified implications for practitioners in
the accounting and audit industry.

As accountants and auditors are facing business clients
currently adopting BT, they are called upon to under-
stand blockchain-based accounting and auditing ap-
plications. Hence, while BT is becoming more widely
adopted across industries, accountants and auditors
must broaden their skill set and knowledge in order to be
able to anticipate and meet the demands of their clients.
This study of current research on BT in the account-
ing and auditing field has highlighted several possible
impacts on the profession with reference to continuous
audits and the application of smart contracts.

For instance, continuous audits enabled by BT
may imply a reduction of labour-intensive and time-
consuming audit activities such as manual data extrac-
tion and audit preparation tasks. This is expected to
allow accountants and auditors to focus on more valu-
able activities, such as strategy advice, in-depth analyses
and data mining. Accounting and auditing practitioners
may expand their services exploiting the BT revolution,
by advising companies on their adoption of BT, as well
as supporting its implementation.

Furthermore, accountants and auditors could play a
pivotal role in the generation, execution and control of
smart contracts. As trusted professionals, accountants
and auditors have the extensive accounting and auditing
expertise necessary to monitor and control how smart
contracts and encoded accounting standards and other

J. Schmitz & G. Leoni Accounting and Auditing at the Time of Blockchain Technology

regulations are being executed. However, in order to be
able to perform this task, accountants and auditors will
need to acquire technical understanding of, for instance,
blockchain-based smart contract solutions and associ-
ated technologies such as AI.

Finally, being the experts in record keeping, standard
setting and the application of complex business rules,
accountants and auditors may gain a relevant role in the
regulation and implementation of BT globally. On the
one hand, they may offer advisory services to their clients
for blockchain-based solutions; on the other hand, they
may provide their expertise to authorities and regulators
willing to institutionalise BT.

This study has elucidated some potential implications
of BT for the accounting and auditing practice. It has
shown that traditional accounting and auditing services
will remain important in the future, though the spec-
trum of tasks that accountants and auditors are required
to fulfil will change, as will the skills they need to develop.
It is unclear precisely how the future of BT in accounting
and auditing will evolve. As BT leverages new opportu-
nities as well as challenges for accountants and auditors,
there is a need for the profession to understand the im-
plications of BT and to stay abreast of developments in
this new blockchain ecosystem. More research is needed
to identify the effects of BT on accounting and auditing
practice and to reveal the perceptions of and responses
to this innovation among accountants and auditors.

Suggestions for future research avenues

From the preceding analysis it is evident that academics’
and professionals’ knowledge of the technological as-
pects of BT and engagement in its technological ad-
vancement is fairly limited. However, if accountants and
auditors want to be on top of the blockchain develop-
ment, such limitations need to be overcome in a timely
manner. Collaborations with scholars and professionals
from IT disciplines may support a better understanding
of BT. The analysis of real-world cases of BT adoption
may provide in-depth insights into blockchain’s useful-
ness for and impacts on the accounting and auditing
profession. Similarly, studies investigating the percep-
tions and experiences of auditors and accountants may
reveal the actions – if any – undertaken in the industry
to face the BT revolution.

In more detail, from our literature review we identi-
fied five areas related to identified key themes on which
future research should focus, in order to shed more light
on the applications and implications of BT. First, future
studies should address the issue of BT and information
accessibility. Concerns about which shareholder or stake-
holder has access to what kinds of information need to
be considered in the context of the particular blockchain
architecture. More precisely, researchers should provide

answers to the question of whether private or public
blockchains or hybrids are best suited for accounting
and auditing purposes. The following research questions
may help to address such matters.

� Who should be participating in the network?
� Who decides what information each participant can

access?
� What kind of accounting information should be

recorded on blockchains?
� Which information should be kept private and which

should be made publicly available?

A second area of future research may focus on the
practical applicability of smart contracts in the
blockchain ecosystem. Providing answers to the follow-
ing questions is of particular significance for standard
setters and regulators who are likely to regulate and
monitor smart contract applications, and for auditors
who rely on accounting standards and other frameworks
when conducting audits:

� What kind of information (rules, regulations, ac-
counting standards) can be encoded into smart con-
tracts?

� How will the use of smart contracts influence the
audit process?

� To what extent may smart contracts make the audit
process more efficient?

With regards to the latter, scholars should measure the
amount of time and labour that could be saved through
the use of smart contracts. A third area of future research
may involve continuous audits, by addressing research
questions such as:

� How will continuous audits be conducted?
� Can continuous audits reach their full potential if only

selected transactions are recorded on blockchains?
� How are auditors going to address the issue of ‘big

data’ generated through continuous audits?

Regarding the latter research question, it needs to be
emphasised that continuous audits are likely to generate
increasing amounts of accounting data with which com-
puters and auditors will be required to deal. A fourth path
of future research may explore the level of technological
understanding and skill sets needed by accountants and
auditors to provide accounting and auditing services to
clients using BT. This may include an extensive analysis
of how BT alters the nature of auditors’ and accoun-
tants’ tasks. Hence, researchers should address research
questions such as:

� What knowledge do accountants and auditors need
to acquire to be able to provide blockchain-based
services?

Accounting and Auditing at the Time of Blockchain Technology J. Schmitz & G. Leoni

� How are accountants and auditors preparing for the
blockchain advancement?

� How do accountants and auditors perceive the
blockchain development?

� What tasks will auditors and accountants have to per-
form in the future and which tasks may disappear?

� How will accountants and auditors work alongside
BT in the future?

A fifth area of potential research may involve the anal-
ysis of the governance and accountability of blockchain
networks. While BT is supposed to increase trust and
transparency, it is yet to be discussed who is to be held
to account when unforeseen difficulties such as fraudu-
lent transactions occur. To shed light on this matter, the
following research questions need to be addressed:

� How are blockchain networks governed?
� What role do accountants and auditors play in the

governance of BT networks?
� Are traditional governance and accountability con-

cepts applicable to BT?

These five areas of potential future research may
exploit different methodological approaches, both
quantitative and qualitative. On the one hand, large-
scale survey questionnaires may allow for large samples
of observations to assess the diffusion stage of BT within
the accounting and auditing industry. In this regard,
survey questionnaires allow for the measurement of
existing levels of BT knowledge and awareness among
accountants and auditors. On the other hand, qualitative
single or multiple case studies of BT applications may
provide in-depth insights into the impacts of BT and
detailed implications of how the accounting and audit-
ing industry is adapting to the blockchain ecosystem.
Moreover, interviews with accountants and auditors
may be conducted to provide first-hand information
from early adopters, potential adopters and those who
may reject the technology.

This study has shed light on BT’s potential for prac-
titioners and academics in the accounting and auditing
field. At the professional level, BT is challenging the tra-
ditional approach to accounting and auditing; hence new
skills and expertise need to be developed by professionals
if they want to face this challenge. At the academic level,
the potential changes introduced by BT call for more re-
search that will help understand this new technology and
support the profession and the regulators dealing with
BT. This study has analysed a small sample of publica-
tions on BT in accounting and auditing but has revealed
significant implications and issues of the development
of blockchain for accountants and auditors. As a result,
it calls for more research by suggesting relevant areas of
future investigation on BT in accounting and auditing.
The suggested areas of future research are not exhaustive

but are a start to a much needed research stream that can
explore a fast-paced technological innovation with the
potential to revolutionise the accounting and auditing
profession.

Notes

1 Scholars and practitioners apply the terms ‘blockchain’ and ‘dis-
tributed ledger technology’ synonymously.

2 Triple-entry bookkeeping was indicated as a solution to the limits
of double-entry bookkeeping (Ijiri 1986) because a third entry by
a neutral intermediary was required to authorise and assure for
the two entries made by the two transacting parties. The third
entry is supposed to be an independent verification to reduce
room for fraudulent behaviour and enhance trust in the system.

3 Global accounting and fraud scandals (e.g., Enron and World-
Com) have demonstrated that double-entry bookkeeping is not
free from flaws. Bankers, traders, brokers and other financial in-
termediaries have acquired a role as gatekeepers of the financial
system (Casey and Vigna 2018b). Those parties do not always
have a legitimate interest in recording transactions accurately.
Therefore, double-entry bookkeeping is said to have only limited
ability to provide comprehensive assurance for the correctness of
companies’ financial statements (Dai and Vasarhelyi 2017).

4 This period was chosen to grant the collection of most recent
publications from the year of the first output on BT (Nakamoto
2008).

5 The selection of Big 4 audit firms is underlined by the evident
adoption of BT by those firms and the seriousness with which
they approach the innovation. PwC, for instance, recruited 15
technology specialists in 2016 to set up a global technology team.
In 2014, Deloitte launched Rubix, a blockchain that supports
advisory services and builds distributed applications for clients
across sectors. EY established its Ops Chain in 2017, which con-
sists of a set of applications that facilitate the commercial use
of BT. KPMG in strategic partnership with Microsoft launched
their joint blockchain nodes in 2017 (NASDAQ 2017). The sam-
ple that constitutes the group of leaders was selected based on the
media attention to their published reports, the number of times
their reports were cited in scholarly works and their interest in
BT demonstrated on their websites.

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