ACCT6007 Financial Accounting Theory and Practice Report 2 Sample

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ACCT6007 Financial Accounting Theory and Practice Report 2 Sample

Context:

This assignment develops research and critical thinking abilities. It is a critical analysis/review of an academic article. Changes in technology are impacting accounting and how accountants perform their jobs. This activity will provide students information on new trends in accounting field.

Instructions:

Download and critically analyse an academic article written by Jun Dai and Miklos. A. Vasarhelyi. This article can be found in the Torrens University library using the following citation: Dai, J. & Vasarhelyi, M.A. (2017 Toward Blockchain-Based Accounting and Assurance. Journal of Information Systems Vol. 31 No. 3, p5-21,
https://torrens.idm.oclc.org/login?url=http://search.ebscohost.com/login.aspx?direct=true&db=bsu &AN=126177472&site=ehost-live

You may use an essay format or any other acceptable academic format for critical review. Use APA 7 referencing style guide. Use minimum 10 academic references.
Answer the following questions during your analysis.

1. Discuss the three phases of blockchain technology? What is the potential use of blockchain technology in accounting?

2. The author discusses Triple Entry Accounting. What is your understanding of the concept?

3. Do you agree or disagree with any arguments made by the author? Explain your point of view and provide evidence in support of your point of views from other academic resources.

4. Critically review any potential issues or problems with blockchain technology being used in accounting.

To answer all the above questions: Review the article provided and search for related academic journal articles. Use minimum 10 academic references. Academic skills resources: Analysing the Brief, Essay Writing, and Critical Thinking

These resources can be downloaded from LASU - Learning and Academic Skills Unit on Blackboard following the link:

https://laureateau.blackboard.com/webapps/blackboard/content/listContent.jsp?course_id=_20163_1&content_id

Solution

Introduction

In the prevailing study, the new technology of block chain for accounting and assurance is been critically evaluated. The relationship between the accounting conceptual framework,accounting theory, and accounting standards is been done. University Assignment Help, The three phases of block chain technology, potential uses of same, potential issues and challenges of block chain and also argument regarding its challenges is provided in the below study. Further the triple entry system of accounting is been critically evaluated below. The reason why it was introduced, its application in the current system and interconnectedness with the block chain technology is provided. Also the research is done in context of this new technology impact on the current accounting and assurance system.

Main Analysis

Three Phases of Block Chain Technology

Since 2009 the evolution of block chain technology gone through three stages. Firstly block chain 1.0, which purely focused on the crypto currency trading. The function of remittance, digital money transfers also its comprised internet of money- a new payment ecosystem. Secondly, block chain 2.0 which also involves same trading but this time with the broader scope of financial applications. These applications include smart property, derivatives and digital asset ownership etc. (Banafa, 2020) This phase expanded the simple digital currency platform into the platform of wide variety of digital products with the help of new application that is smart contracts. These smart contracts automatically execute, verify and enforce the terms of the contracts operating on block chain. The terms and conditions agreed by various trading parties are encoded through the smart contracts. Further these smart contracts execute the tasks which were pre- specified automatically and settle the contract by examining the changes in conditions with relation to the contracts’ embedded rules. The last phase, block chain 3.0 was the further expansion of block chain2.0 system. This expansion was beyond the business and financial applications. This includes voting system, products related to cloud storage, attestation services, even the government administration transformation (Umarovich, et al, 2017). Through this version the administration of government could also be dramatically transformed into the decentralized monitoring tools and self-management.

Potential Uses of Block Chain

• The first and foremost potential of use of the block chain is that, it could be used in transformation of auditing process into more precise and timely automatic assurance system.

• The block chain technology for accounting could re- conceive corporate accounting

• It is considered as a new kind of data base which has the potential to play role in ERP as accounting module.

• Also could be used as conjunction for the existing accounting system

Triple Entry Accounting

The concept of triple entry account is been observed and discussed by various professionals and academics since years (Ravi, 2020). The primitive mechanism was of single entry book keeping transaction under which there were high chances of risks and fraud apart from being simple and effective, it was difficult to get repaired and track. In order to overcome these issues double entry system was introduced. This system was quite efficient and rapidly enables the conformation that whether the transaction recorded is correctly or not. This introduction helped in minimizing the human transactional errors but was unable to provide sufficient assurance to the high level companies regarding their financial statements. Therefore in order to overcome this issue of assurance the triple entry accounting system was introduced. It was proposed to get utilize as independent paradigm also a secure one. This helped in improving the reliability of various companies on their financial statements (Zhang et al, 2020). Originally this system included or it could be said that it requires the neutral intermediary in its transaction recording process with each of the party. So there was involvement of three parties those are two of the parties which are involved in the transaction and one intermediary, this resulted in total three entries. However the intermediary required under this triple entry system must be reliable and independent in order to verify each party transaction (Block, 2020). In addition to this the entries stored by the middle person are highly exposed to risk, or unauthorized changes due to cyber-attack. But the new launched technology of black chain has the potential to mitigate these cyber-attack risks and improve the mechanism of triple entry system. This technology could play the role of intermediary by automating and distributing the storage, providing secure platform for transaction, verifying the entire process and prevent the transaction from getting tampered.

Disagreeing on The Argument

That blockchain-based assurance and accounting methodology would provide verifiable information disclosure, real-time, and progressively automated assurance Undoubtedly the above argument is true but is not acceptable as the block chain technology comes with various limitations and drawbacks though. The goal of the author was to discuss regarding the impact of block chain technology on accounting and assurance profession, but it has although many drawbacks. This technology is rapidly getting developed and emerged due to which various new approaches and algorithms are been introduced in the application of accounting and assurance. So these algorithms are needed to be expanded due to the rapid growth of such technology and are required to be reconsidered. Further the author has only discussed about the impact and role of such technology on the profession of accounting and assurance which it plays. The challenges such as in the areas of government auditing, corporate auditing need further identification and re-thinking. As the regulatory frame work of block is is decentralized, which means there’s no one power to enforce law and order in the network no leaders, no moderators (ALI, 2021). Also the concept of triple entry system under this is not acceptable in such a rapidly changing world; the adaption of such might just be an adaption to the advanced world. Unfortunately the operation of this new tech technology needs computation resources and sufficient storage. The placing of such a lengthy corporate data would be extremely expensive and potentially demanding for the computation of current commercials (Schifrin, 2019). Such requirements of the technology could eventually impede the popularization of this technology especially for the medium and small term firms. Even also the large enterprises might refuse the usage of such technology if they had significant issues from the performance and efficiency of current system operations. Thereby I disagree with the argument of author on the benefits of this block chain technology as it has several drawbacks and would most probably rejected from being used.

Potential issues with block chain technology in accounting are-

Security and transparency related issues are the potential problems associated with the block chain technology (Tochen, 2019). The block chain technology is secure as secure the weakest links are. For instance if one party wants to access the data within the block chain they could only access one node of it. That means the block chain is easiest to hack, hence there is huge threat to the entries embedded in it. That is not the only risk with it, but also it is possible to get exposed in fraudulent practices for the approved transactions. The poof of identity, proof of stake both are at risk, as anyone could easily get access in the block chains. The existing accounting standard in the technology could further be adapted increasingly for more transparent and verifiable accounting ecosystem (Hastig & Sodhi, 2020). The role of auditors also in the new accounting system is required to be re-through and the reengineering of currents audit paradigm is required.

In addition to this, one important issue that is worth careful consideration is the scope of participants in the block chain based accounting ecosystem. This especially occurs in the case when the verification of transactions or creation and validation of smart contract is there. The black chain technology for the accounting system is a permission block chain in which only the transaction of the companies can be submitted into the block chain ledger, with the verification function being restricted to accountants, management, and auditors (Orcutt, 2018). Also substantial security and cyber-attacks knowledge is highly required by the block chain technology algorithms and its operating paradigms. For such challenges the managers and accountants are required to get the training from the IT professionals, which is necessary to use such technology effectively and correctly. Further to participate in the implementation and designing of the smart contracts the training is required by these parties.

Conclusion

From the above study of critical evaluation on the block chain technology it could be concluded that the technology has several potential uses and merits. Such as, it could be used for re- conceiving corporate accounting, could make the present accounting system more precise and accurate. Further it could be noticed that the technology was evolved through three major phases and also the introduction and concept of triple entry system is understood briefly above. But apart from these potential uses, this technology also contains various limitations or drawbacks with it application. Such as it requires sufficient space, it is quite expensive; also some of the shortcomings are noticed in terms of cyber security and transparency of this technology. Thereby, it could be said that the technology has more shortcomings than the uses.

References

Ali, F., 2021 (Online) The Top 5 Problems with Block chain Technology. Retrieved from <https://www.makeuseof.com/problems-with-blockchain-technology/> .

Banafa, A. (2020). Blockchain technology and applications (Ser. River publishers series in security and digital forensics). River. Retrieved November 13, 2021, https://lesa.on.worldcat.org/v2/oclc/1224527152

Block, D. A. (2020). Output management technology: the missing link in the information delivery chain. Computer Technology Review, 40-43, 40–43.https://lesa.on.worldcat.org/v2/oclc/5321867264

Dai, J. & Vasarhelyi, M.A. (2017 Toward Blockchain-Based Accounting and Assurance. Journal of Information Systems Vol. 31 No. 3, p5-21, https://lesa.on.worldcat.org/v2/oclc/7286844609

Hastig, G. M., & Sodhi, M. M. S. (2020). Blockchain for supply chain traceability: business requirements and critical success factors. Production and Operations Management, 29(4), 935–954. https://doi.org/10.1111/poms.13147

Orcutt, M. (2018). Block chain. Mit Technology Review, 121(3), 18.https://lesa.on.worldcat.org/v2/oclc/7613275795

Ravi, S. (2020). Block chain technology &amp; its use in banking sector. Business World, (oct 26, 2020). https://lesa.on.worldcat.org/v2/oclc/8685801874
Schifrin, M. (2019). Block chain 50. Forbes, 202(3), 86–86. https://lesa.on.worldcat.org/v2/oclc/8094358989

Tochen, D. (2019). Block chain technology: a solution in search of a problem-or a revolution? The Brief, 49(1), 50–56. https://lesa.on.worldcat.org/v2/oclc/8531105397

Umarovich, A. A., Gennadyevna, V. N., Vladimirovna, A. O., &amp; Alexandrovich, S. R. (2017). Block chain and financial controlling in the system of technological provision of large corporations' economic security. European Research Studies, 20(3b), 3–12. https://lesa.on.worldcat.org/v2/oclc/7146245319

Zhang, L., Xie, Y., Zheng, Y., Xue, W., Zheng, X., & Xu, X. (2020). The challenges and countermeasures of blockchain in finance and economics. Systems Research and Behavioral Science, 37(4), 691–698. https://doi.org/10.1002/sres.2710.

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