Blockchain: The Introduction and Its Application in Financial Accounting

Date01 October 2018
AuthorTing Yu,Zhiwei Lin,Qingliang Tang
Published date01 October 2018
Blockchain: The Introduction
and Its Application in Financial
Ting Yu, Zhiwei Lin and Qingliang Tang
Listed companies
partially reduce
information asymme-
try with outside
information users by
regularly providing
nancial statements
audited by indepen-
dent auditors. How-
ever, the existence of
agency problems
weakens the active
role of nancial
accounting and inde-
pendent auditing in
resolving information
asymmetry (Healy &
Palepu, 2001). As a
decentralized ledger
technology (hereafter
DLT), the block-
chain technology has
characteristics of
transparent, secure,
permanent, and immutable
(Antonopoulos, 2017; Narayanan,
Bonneau, Felten, Miller, &
Goldfeder, 2016), and it has the
potential of enhancing the trust
between market participants.
Yermack (2017) discusses the
potential implications of using
blockchain technology in cor-
porate governance. This article
mainly discusses pos-
sible impacts that the
application of block-
chain technology
could have on nan-
cial accounting and
its potential inuences
on independent audi-
tors and nancial
This article argues
that the application of
blockchain technology
in nancial accounting
is progressive due to
its problems of limited
data processing
capacity, information
condentiality and
regulatory difculties.
Firms could use block-
chain as a platform to
voluntarily disclose
nancial and non-
nancial information in
the short run. It is a
high-quality signaling that
enables rms to solve the trust
problem with outside information
users. In the long run, the block-
chain technology and smart
Blockchain, as a decentralized ledger technol-
ogy with characteristics of transparent, secure,
permanent and immutable, has been applied
in many elds such as cryptocurrency, equity
nancing, and corporate governance. However,
the blockchain technology is in the experimental
stage and has several problems to be solved
including limited data processing capacity,
information condentiality, and regulatory dif-
application of blockchain technology in nancial
accounting and its possible impacts. We argue
that in the short run the public blockchain could
be used as a platform for rms to voluntarily
disclose information. In the long run, the appli-
cation could effectively reduce errors in disclo-
sure and earnings management, increase the
quality of accounting information and mitigate
information asymmetry. We also discuss poten-
tial impacts that the application will have on
independent auditors and nancial accoun-
tants. © 2019 Wiley Periodicals, Inc.
Refereed (Double-Blind
Peer Reviewed)
© 2019 Wiley Periodicals, Inc.
Published online in Wiley Online Library (
DOI 10.1002/jcaf.22365 37

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