Accounting and auditing with blockchain technology and artificial Intelligence: A literature review

This paper surveys the published work on how blockchain technology will impact accounting in general, but AI-enabled auditing specifically. The purpose is to investigate how blockchain technology can improve transparency and trust in accounting practice and how professionals can use blockchain data to improve decision-making, based on the qualities of immutability, append-only, shared, verified, and agreed-upon (i.e., consensus-driven) blockchain data. The multi-party validation of blockchain protocols adds real-time trusted data for the AI systems used by auditors to improve assurance and efficiency. This review summarizes four themes emerging from the literature focusing on how blockchain technology has changed record-keeping in accounting: event approach to accounting; real-time accounting; triple entry-accounting and continuous auditing. The research interprets the findings using agency theory and stakeholder theory to advance how using blockchain to mitigate information asymmetry and improve stakeholder collaborations is understood. The investigation also summarizes the challenges and clarifies organizations’ reasons to be cautious about adopting blockchain. Lastly, the study suggests that future researchers use this study in two ways that enrich blockchain literature: first, to apply the themes and answer the questions identified within this review to improve the business methods of practitioners and policymakers; and second, to encourage stakeholders such as practitioners, system designers/developers, and policymakers to collaborate in designing blockchain ecosystems that suit accounting and auditing as they transform digitally.     

Blockchain as the Database Engine in the Accounting System

This paper examines the prediction that blockchain technology will transform accounting and the profession because transactions recorded on a blockchain can be aggregated into financial statements and confirmed as true and accurate. We argue that blockchain technology affects the database engine of the accounting information system (AIS) through digitisation of the current paper‐based validation process. In a blockchain‐based AIS, accountants will no longer be the central authority but will remain the preparer of financial reports required by regulations; they will continue to influence policies such as the choice and accreditation of validators and serve as validators of last resort. Audit evidence still needs to be gathered for rendering of an audit opinion in a blockchain‐based AIS. While digitisation of the validation process reduces the error rate and lowers the cost of vouching and tracing, and immutability of blockchain data reduces the incentive and opportunities for fraud, a blockchain‐based AIS alone does not guarantee that financial reports are true and fair. Lower error rates and reduced incentives for accounting fraud in a blockchain‐based AIS are expected to improve audit quality. This prediction will need to be empirically tested when blockchain‐based AIS become available. Using the three‐tier architecture of the AIS, this paper addresses the gap in the literature that misses how characteristics of blockchain technology can influence the implementation of a blockchain‐based AIS with related implications for the accounting profession.     

Judgment and Decision‐Making Research in Auditing and Accounting: Future Research Implications of Person,Task, and Environment Perspective

The discipline of accounting and auditing has increasingly recognized judgment and decision making (JDM) as highly important attributes in the profession because individuals such as managers, auditors, financial analysts, accountants, and standard setters make pivotal judgments and decisions. Many studies undertaken in this domain of research also substantiate the significance of JDM in accounting and auditing. This study evaluates all the papers published in 10 accounting journals among the leading ones from 1980 to 2010 that fall within the domain of JDM research. The categorization of the studies reviewed in this paper is based on Bonner's ( 1999 ) three major determinants of JDM: Person, Task, and Environment variables. The review highlights the progress in the literature over the past three decades and also identifies the methodological limitations of previous research. The identified limitations will be useful for improving the research method of future JDM studies in accounting and auditing. The review also draws inferences on how JDM research in auditing, which is well established, could usefully guide future JDM research in financial accounting.     

Creating a profession ‘out of nothing’? The case of the Belgian auditing profession

This paper presents the results of a study on the emergence and development of an auditing profession in Belgium in the late 1940s and 1950s. Recent research on Anglo-Saxon professions stresses the role of the state in their development. In continental European contexts, the state played an even more significant role, and civil servants in public administration often served as a model for professional organization and behaviour. The main parties that were involved in the creation of the Belgian auditing profession were the state, the employers and the unions. The state maintained a separation between the Belgian profession of independent auditors, the reviseurs d'entreprises, and the associations of accounting professionals, the experts comptables, who tried first to prevent the creation of an auditing profession and then to obtain control over it. This paper demonstrates that the parties in the debate supported different professional models, depending on what they considered the main role of the auditors to be. The debates preceding and following the introduction of the profession focused on the autonomy and structure of the profession, the services to be provided by the auditors, and access to the profession.     

Thinking Outside the Block: Projected Phases of Blockchain Integration in the Accounting Industry

This paper aims to propound a thorough and circumspect analysis of the implications of blockchain technology in the accounting profession and its broader industry. The analysis begins with a summary of early developments by first movers and how they are harnessing blockchain technology to improve business practices. Concomitantly, the paper will go on to discuss how this technology will streamline accounting processes, specifically as the technology approaches critical mass. Finally, a discussion of its long‐term implications will follow through a more philosophical and conceptual dialogue. Throughout the paper, criticisms will be raised to address concerns regarding blockchain's widespread use.     

The decade-long cryptocurrencies and the blockchain rollercoaster: Mapping the intellectual structure and charting future directions

Recent advances in science mapping allowed to analyze the entire intellectual structure of blockchain and cryptocurrencies in business-related disciplines to identify 174 academic articles as well as 1482 practitioner-oriented articles published since the inception of cryptocurrencies in 2008 to highlight key trends of the published outputs. The results demonstrate academic research done by 389 authors in 296 organizations based in 50 countries that only just initiated the conversation on four major streams of the literature—Bitcoin and cryptocurrencies; blockchain adoption; cryptocurrency and blockchain environment; and business model innovations. When comparing academic scholarship to practitioner-oriented literature, the results demonstrate that practitioners discussed investor-related themes, cryptocurrency intrinsic value, political-economic sphere, and the impact of cryptocurrency and blockchain technologies on the wider society in greater detail. As a result, a number of themes are identified and discussed that could align academic and practitioner interests and provide guidance for further research in this important field.     

Perspectives from mainland China,Hong Kong and the UK on the development of China’s auditing firms: implications and a research agenda

Based on gaining privileged access to interview senior representatives of audit firms, regulatory bodies, financial institutions, universities and other organisations in mainland China, Hong Kong and the UK, this exploratory study presents a range of informed views about the rapid development of China’s auditing profession over the last 25 years. It explores the emerging roles of the firms in the 2nd-tier international networks and among the larger stand-alone firms as challengers to the Big 4, nationally and internationally. It identifies national and international institutional interactions that have shaped and are being shaped by this rapid growth, with particular reference to the overarching role of the State’s shifting strategies to create a domestic profession in China that can compete internationally. The potential consequences, given China’s unequalled size and its expanding global influence, could change the nature and structure of the global profession. A significant contribution of this exploratory empirical study has been to deconstruct the continuing conventional political and academic rhetoric that dichotomises firms into ‘foreign vs local’ and ‘Big 4 vs other’. It contributes new voices and alternative perspectives to the emerging literature on the glocalization of large professional services firms and suggests new opportunities for future auditing research.     

Internalization versus externalization of the internal audit function: an examination of professional and organizational imperatives

This paper examines the recent trend towards the outsourcing of internal audit services to the public accounting profession. Here we draw from two dominant literature perspectives (the sociology of professions literature and the outsourcing literature) to examine this clash between the public accounting profession and the internal auditing profession over the provision of internal audit services. Two major research propositions are postulated from which to consider these issues. These propositions concern themselves with the efforts of both the public accounting profession and the internal audit profession in this outsourcing debate. We examine these professions both in terms of volitional professional behavior (as espoused in the sociology of professions literature) and organizational arguments (inherent advantages and disadvantages of the externalization of work as typically espoused by the outsourcing literature).     

Corporate reporting on the Internet and the expectations gap: new face of an old problem

While the practice of Internet financial reporting (IFR) has evolved rapidly, research has questioned the corresponding responsiveness of the auditing profession. This study investigates the existence and nature of an expectations gap that may have arisen in relation to the auditor's role and responsibilities with respect to IFR. Based on a questionnaire survey in New Zealand, results confirm the existence of an expectations gap between auditors and stakeholder groups. Specific responsibilities contributing to deficient performance, deficient standards, and unreasonable expectations components of this gap are identified. The principal pronouncement dealing with auditors’ relevant responsibilities in New Zealand is AGS 1003 Audit Issues Relating to the Electronic Presentation of Financial Statements and Related Auditor's Reports. AGS 1003 discusses, inter alia, the auditor's role and responsibilities in relation to electronic financial statements before and after online publication, and the implications of IFR for the auditor's report and other audit communications. The study argues that the authoritative status of such guidance statements may contribute to a perpetuation of the gap. Furthermore, the profession is urged to avoid ‘standard’ professional responses to the issues, which risk being labelled insufficient and/or strategically motivated. The findings have policy implications for standard-setters internationally.     

AE Briefings — Statement of Intent

This paper seeks to address the perceived failure of university teaching to foster critical understanding of audit practice and to identify a potential remedy. It contributes to the debate (Maltby, 2001, “Second thoughts about ‘Cases in Auditing’,” Accounting Education: an international journal, 10(4), 421–428) by investigating the double-faceted nature of auditing: as a sub-set of the academic discipline of accounting and as professional practice. Although case studies are helpful for students of auditing, they tend to be artificial, or at best, retrospective. This paper introduces a different type of case study for audit education using corporate failure stories from the media as an example, proposing and explaining the notion of the ‘living case’ in order to foster critical appraisal of audit practice. It contributes to the literature on audit education by describing how this different type of case can address both the technical activities and the social practice of audit through Kolb's (1984, Experiential Learning: Experience as the Source of Learning and Development, Englewood Cliffs, NJ: Prentice Hall) experiential learning theory and thus concludes that there is a place for the practical nature of auditing in academic study, in order to fully appreciate the social aspects.     

The impacts of electronic commerce on auditing practices: an auditing process model for evidence collection and validation

The main purposes of this paper are twofold. First, the paper identifies and discusses the potential impacts of electronic commerce on auditing practices in the emerging paperless on-line transaction environment. Second, it provides two auditing process models that incorporate modern network security techniques and show how an audit can be conducted in an EC environment. A periodical auditing process model (PAPM) is proposed to demonstrate how secure electronic technologies can be used to facilitate the auditor's evidence collection and validation process for annual and semi-annual audits. We also present a continuous auditing process model (CAPM) which extends the functions of PAPM for continuous auditing. In CAPM, a real-time transaction monitoring system is used to link to firms' accounting information systems for assisting the auditor to detect abnormal activities and generate exception reports on a continuous basis. The CAPM approach intends not only to ensure integrity and effectiveness of the entire accounting system, but also to guarantee the correctness and usefulness of the constantly generated financial statements for public dissemination. The main contribution of this paper is that it illustrates a conceptual framework which shows the feasibility of continuously auditing electronic transactions in the EC environment. Copyright © 2000 John Wiley & Sons, Ltd.     

Imperialism of influence and the state–profession relationship: The formation of the Greek auditing profession in the post-WWII era

A significant body of academic research on accounting professionalization has shown that ‘Western’ policies and influences (re)structure the social, political and economic context of emerging economies in a way that creates conditions favourable to the emergence of auditing bodies similar to the dominant Anglo-American associationist, free market model. In contrast, this paper argues that, under certain conditions, the formation of the audit profession in an emerging economy may exhibit significant organisational differences from the dominant Anglo-American model. The paper focuses on the formation of the Greek institution of auditing in the aftermath of WWII and shows that, despite “Western” influences, a corporatist auditing body was instituted as a means of better serving state policy priorities (public over market purposes). Hence, developments in auditing may not follow in a linear fashion as the predetermined outcome of pressures exerted by “Western” organisations and as a (perfect) emulation of the dominant Anglo-American paradigm.     

A commentary on “Why DCF capital budgeting is bad for business and why business schools should stop teaching it”

‘Towards a conceptual framework for auditing’ suggest a conceptual framework, which it is hoped may help in the teaching and understanding of external attest auditing. Briloff's (1986) view that ‘as concern for ecology and the wellbeing of consumers in posterity intensifies, this responsibility (accountability) will extend to the total society and environment’ is taken as the philosophical departure point for the conceptual framework.

The paucity of attempts to develop a unifying theory of auditing is noted and a brief history of developments is traced commencing with Mautz and Sharaf in 1961. Flint's 1988 work (The Philosophy and Principles of Auditing) is adopted and developed. Each of Flint's concepts is examined in some detail to consider its significance in the conceptual framework and its implications for audit practice. Reasons for changes from earlier frameworks are offered.

In order to illustrate the effectiveness of the framework as an holistic tool of analysis, the concepts identified are then related to the Auditing Standards and Guidelines of our national professional accounting association, the New Zealand Society of Accountants (NZSA). Whilst considerable correlation is noted, some inconsistencies are also identified. It is suggested that the standards and guidelines may not have derived from any philosophical analysis and that the inconsistencies between the concepts and the standards appear to have resulted from a lack of a clear theory as to what constitutes a standard and what constitutes a guideline; higher and lower order ideas would appear to fall somewhat indiscriminately in both. It is noted that this analysis may be repeated in respect of the auditing standards of any professional organization.

It is concluded that the application of these concepts can lead to more informed discussion of some of the controversial issues that face the auditing profession at this time, and to an holistic understanding of the discipline of auditing as well as of professional audit promulgations. It is recommended that standard setters should give thought to the adoption of a more holistic approach to standard setting, grounded in a conceptual framework, and that auditing educators should adopt such a framework in order to assist students towards an understanding of the role and process of auditing and away from the memorizing of techniques.     

Big Data Opportunities for Accounting and Finance Practice and Research

We examine the research opportunities for the use of ‘big data’ in accounting and finance. The purpose of the study is to present a snapshot of big data academic research in information systems, accounting and finance, and to highlight areas for further research in accounting and finance. The research question addressed in this work is: What are the major themes in existing research in big data and where are the resulting gaps in the accounting and finance literature? An analysis is presented of 47 accounting, finance and information systems journals from 2007–2016. We identify and sample the relevant literature to derive a taxonomy of themes. These themes are presented as a conceptual matrix in which the themes from the taxonomy are used as concepts, and the matrix identifies where they appear, and where there are potential areas for further research. Prior research in big data in accounting, finance and information systems falls into six themes. The six under‐researched areas of big data in accounting and finance are risk and security, data visualisation and predictive analytics, data management and data quality. Increased research in these areas will lead to improvements in industry practices, and opportunities for cross‐disciplinary research.     

Accounting and Accountability in Fiji: A Review and Synthesis

This paper reviews accounting and accountability research in Fiji. The review is based on 47 papers published since 1978 in accounting refereed journals, professional journals, edited book chapters and theses and other refereed journals outside accounting. In addition to categorisation of the reviewed papers according to accounting topics, theories and methods of data collection, some themes to which the papers could be related are discussed. Financial reporting/accountability research is the most popular research in Fiji followed by new public management research, with sustainability accounting research the third most popular. The paper's findings suggest some directions for future accounting research in Fiji and where the data can possibly be sourced for such research. We conclude that more research is needed in the Fijian context that focuses on accounting and the state, performance auditing, indigenous accounting, SMEs and accountability.     

Rationalisation,charisma and accounting professionalisation: perspectives on the intra-professional conflict in Greece, 1993–2001

During the 1990s Greek auditors and branches of international accounting firms in Greece fought a veritable professional war over the jurisdiction of statutory auditing. This intra-professional conflict developed against a backdrop of profound changes in the socio-economic and political fabric of the country, along pro-liberal, free market lines. This paper looks at a particular episode of that conflict––an attempt by the indigenous auditors to regain the monopoly of practice they lost, following the `liberalisation' of the Greek auditing profession in 1992. The paper argues that Max Weber's theoretical work on history and social development can be applied in helping to understand complex processes of contemporary change in the accounting profession. The analysis of this case study posits that rationalisation and charisma play a major role in helping to effect historical change through their influence on class–status–party, the tripartite stratificatory structure of modern society. In these encounters, multifarious social, economic and political actors with overlapping or differing interests interact with one another. The end result is that historical development is read as a fluid process whose outcome appears uncertain, although certain trends may be discernible in the particular historical juncture examined in this case study.     

A Review of Big Data Research in Accounting

The impending fourth industrial revolution has enhanced the role of big data analytics in today’s business practice. Consequently, many now consider big data as the most strategic resource in business to the extent that organizations that fail to utilize it may become competitively disadvantaged. Following these developments, questions have been raised about the future of the accounting discipline, especially in terms of how it can continue to add value to organizations. While some scholars have attempted to address this question, it remains an abstract concept requiring further investigation. Therefore, this study conducts a systematic literature review to determine the status of accounting research on big data analytics and provides avenues for further studies. By conducting co-occurrence network analysis on 52 peer-reviewed articles published from 2010 to 2020, three broad themes emerged, entailing big data implications for accounting practice, education, and research design. A further examination of the themes revealed few empirical studies on the phenomenon, as conceptual research dominates the field. Although external audit implications of big data are widely discussed, other accounting domains (e.g., managerial accounting and taxation) are underexplored. Therefore, future studies may focus on the implications of big data on variables such as performance measurement, information governance, tax behavior, curriculum design, and pedagogy.     

Ranking accounting journals using dissertation citation analysis: A research note

Prior literature on accounting journal rankings has provided different journal lists depending on the type of examination (citations- vs. survey-based) and the choice of journals covered. A recent study by Bonner, Hesford, Van der Stede, and Young (2006) [Bonner, S., Hesford, A., Van der Stede, W. A., & Young, M. S. (2006). The most influential journals in academic accounting. Accounting, Organizations and Society, 31(7), 663–685] documents disproportionately more citations in the financial accounting area, suggesting a financial accounting bias in the accounting literature. We use citations from accounting dissertations completed during 1999–2003 to provide a ranking of accounting journals. The database allows us to assess the research interests of new accounting scholars and the literature sources they draw from. Another innovation is our ranking of accounting journals based on specialty areas (auditing, financial, managerial, tax, systems, and other) and research methods (archival, experimental, modeling, survey, and other). To mitigate the financial accounting bias documented by Bonner et al. (2006), we derive a ranking metric by scaling (normalizing) the journal citations by the number of dissertations within each specialty area and research method. Overall, the top journals are, JAR, AOS, TAR, and JAE. We also provide evidence that top journal rankings do vary by specialty area as well as by research methods.     

Bridging the Gap: Engaging in Scholarship with Accountancy Employers to Enhance Understanding of Skills Development and Employability

Abstract

This paper reports on the author's experiences of working with accountancy employers to develop a deeper understanding of skills development and employability in the accountancy profession. It notes that while there is a well-developed literature that examines skills development amongst university accounting students, there is also evidence of a gap between skills development in the university setting and the reported experiences of new entrants into the accountancy profession. The paper examines the nature of this gap and attempts to bridge it, using the experiences of working together with employers. The evidence from this study is that accountancy employers seek new recruits with the capacity to establish professional credibility amongst colleagues and clients through their attitudes and behaviours, something subtly different from much of the literature, which focuses on the importance of discrete generic skills.     

Evidence-based policymaking in auditing regulation: An historical analysis of academic research citation in PCAOB standard-setting practices

The success of the auditing profession hinges on the efficient and effective development of authoritative guidance that directs practice. Given the opportunity to assist, academicians can provide an understanding of the costs, benefits, and unintended consequences of potential regulatory decisions. Currently, few studies exist in the extant literature that explore the relationship between the development of auditing standards and the contribution of academic research. To investigate the scope of academic literature consideration in the development of public company auditing regulation, we examine whether and to what extent academic citations are referenced throughout the PCAOB’s rulemaking documents. We find evidence that the PCAOB currently appears to incorporate the use of an evidence-based policymaking approach in its standard-setting practices, progressively evolving since its incipience. The findings of this study may lead to a calling for more robust academic discussion in future PCAOB public policy decisions, which in turn may benefit the auditing profession.