Blockchain: The Introduction and Its Application in Financial Accounting
Date | 01 October 2018 |
Author | Ting Yu,Zhiwei Lin,Qingliang Tang |
Published date | 01 October 2018 |
DOI | http://doi.org/10.1002/jcaf.22365 |
Blockchain: The Introduction
and Its Application in Financial
Accounting
Ting Yu, Zhiwei Lin and Qingliang Tang
INTRODUCTION
Listed companies
partially reduce
information asymme-
try with outside
information users by
regularly providing
financial statements
audited by indepen-
dent auditors. How-
ever, the existence of
agency problems
weakens the active
role of financial
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 finan-
cial accounting and
its potential influences
on independent audi-
tors and financial
accountants.
1
This article argues
that the application of
blockchain technology
in financial accounting
is progressive due to
its problems of limited
data processing
capacity, information
confidentiality and
regulatory difficulties.
Firms could use block-
chain as a platform to
voluntarily disclose
financial and nonfi-
nancial information in
the short run. It is a
high-quality signaling that
enables firms 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 fields such as cryptocurrency, equity
financing, 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 confidentiality, and regulatory diffi-
culties.Thisstudyshedslightonthepotential
application of blockchain technology in financial
accounting and its possible impacts. We argue
that in the short run the public blockchain could
be used as a platform for firms 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 financial accoun-
tants. © 2019 Wiley Periodicals, Inc.
Refereed (Double-Blind
Peer Reviewed)
© 2019 Wiley Periodicals, Inc.
Published online in Wiley Online Library (wileyonlinelibrary.com).
DOI 10.1002/jcaf.22365 37
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