Blockchain and Auditing: A Literature Review

This literature review explores the emerging intersection of blockchain technology and auditing, examining how blockchain can transform accounting and auditing practices. It delves into the potential benefits, challenges, and research opportunities related to blockchain's impact on financial reporting, transparency, and fraud detection.

Key Research Questions

This review addresses several key research questions related to blockchain and auditing:

• How can blockchain enhance transparency and accountability in financial reporting?
• What are the challenges and opportunities associated with auditing blockchain-based accounting systems?
• What are the implications of blockchain for the future of the auditing profession?

Literature Review

The following publications provide insights into the evolving relationship between blockchain and auditing:

• Alles, M., Gray, G. L., 2020. 'The first mile problem': Deriving an endogenous demand for auditing in blockchain-based business processes. International Journal of Accounting Information Systems. 38(September 2020, 100465), 1– 15. This study explores the 'first mile problem' in blockchain, emphasizing the need for auditing to ensure trust and reliability in blockchain-based business processes.
• Angelis, J., Ribeiro da Silva, E., 2019. Blockchain adoption: A value driver perspective. Bus. Horiz. 62 (3), 307–314. This paper analyzes the value drivers for blockchain adoption, highlighting its potential to improve efficiency, transparency, and security in various business processes.
• Antoinette, A., 2018. Being the bookkeeper of the future. Account. Today 32 (7), 1. This article discusses the evolving role of accountants in the age of blockchain, emphasizing the need for skills related to data analysis and technology.
• Appelbaum, D., Nehmer, R.A., 2020. Auditing cloud-based blockchain accounting systems. J. Inform. Syst. 34 (2), 5–21. This research focuses on the specific challenges and considerations associated with auditing blockchain-based accounting systems hosted on cloud platforms.
• BEIS.,2020. Use of distributed ledger technologies to verify the provenance of goods. Gov.UK (Department for Business, Energy & Industrial Strategy). Available at. https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/923608/use-distributed-ledgers-verify-provenance-goods.pdf (Accessed: 21 June 21). This government publication explores the use of distributed ledger technologies (DLT), including blockchain, for verifying the provenance and authenticity of goods.
• Benlian, A., Kettinger, W.J., Sunyaev, A., Winkler, T.J., 2018. Special section: The transformative value of cloud computing: A decoupling, platformization, and recombination theoretical framework. J. Manag. Inf. Syst. 35 (3), 719–739. This article provides a theoretical framework for understanding the transformative potential of cloud computing, which is relevant to blockchain adoption as many blockchain platforms are cloud-based.
• Berle, A., Means, C.G., 1932. The Modern Corporation and Private Property. Macmillan, New York. This classic work on corporate governance provides insights into the challenges of managing large, complex organizations, which are relevant to the governance and auditing of blockchain-based systems.
• Bertino, E., Kundu, A., Sura, Z., 2019. Data transparency with Blockchain and AI ethics. J. Data Inform. Qual. 11 (4), 1–8. This research explores the intersection of blockchain, AI, and data transparency, highlighting the ethical considerations of using these technologies.
• Biais, B., Bisire, C., Bouvard, M., Casamatta, C., 2019. The blockchain folk theorem. Rev. Financ. Stud. 32 (5), 1662– 1715. This study investigates the economic implications of blockchain, specifically examining how it can facilitate trust and cooperation in decentralized environments.
• Boillet, J., 2017. Are auditors ready for blockchain? The audit profession is eyeing blockchain. Account. Today. 31 (9), 34. This article examines the readiness of the audit profession to adapt to blockchain technology, emphasizing the need for new skills and expertise.
• Brennan, N.M., Subramaniam, N., van Staden, C.J., 2019. Corporate governance implications of disruptive technology: An overview. Brit. Account. Rev. 51 (6), 100860. This paper provides a comprehensive overview of the corporate governance implications of disruptive technologies, including blockchain, highlighting the need for adjustments in corporate structures and processes.
• Brown, R. G., Carlyle, J., Grigg, I., Hearn, M., 2016. Corda: An Introduction. R3. Available at. https://docs.corda.net/en/pdf/corda-introductory-whitepaper.pdf (Accessed: 3 July 2020). This white paper introduces Corda, a blockchain platform designed for business applications, providing insights into the technical aspects of blockchain development.
• Buterin, V., 2014. Ethereum White Paper: A Next Generation Smart Contract & Decentralized Application Platform. Etherum, January, 1–36. Available at. https:// github.com/ethereum/wiki/wiki/White-Paper (Accessed: 6 June 2020). This white paper outlines the architecture and functionality of Ethereum, a popular blockchain platform that enables the development of smart contracts and decentralized applications.
• Cai, C.W., 2019. Triple-entry accounting with blockchain: How far have we come? Account. Fin. 1–23. This article explores the concept of triple-entry accounting, a potential accounting model enabled by blockchain, which could enhance transparency and accountability.
• Carlin, T., 2019. Blockchain and the journey beyond double entry. Aust. Account. Rev. 29 (2), 305–311. This paper discusses the potential for blockchain to transform accounting beyond the traditional double-entry system, leading to more efficient and reliable financial reporting.
• Carlozo, L., 2017. What is blockchain? J. Account. 224 (1), 1–2. This article provides a concise overview of blockchain technology, explaining its key features and potential applications in accounting.
• Casino, F., Dasaklis, T.K., Patsakis, C., 2019. A systematic literature review of blockchain-based applications: Current status, classification and open issues. Telemat. Inform. 36, 55–81. This comprehensive literature review provides a classification of blockchain-based applications and identifies key research gaps and future directions for research.
• Chen, M.A., Wu, Q., Yang, B., 2019. How valuable Is FinTech innovation? Rev. Financ. Stud. 32 (5), 2062–2106. This study examines the value of FinTech innovation, including blockchain, emphasizing its potential to disrupt traditional financial systems and create new opportunities.
• Chiu, V., Chan, D.Y., Vasarhelyi, M.A., 2018. Introduction. Continuous Audit. 1–6. This introductory chapter discusses the concept of continuous auditing, which is facilitated by blockchain's ability to provide real-time data and insights.
• Christie, L., 2018. Distributed Ledger Technology. POSTbrief Houses of Parliament. Available at. https://researchbriefings.parliament.uk/ResearchBriefing/ Summary/POST-PB-0028 (Accessed: 26 November 2019). This parliamentary briefing provides a high-level overview of distributed ledger technology, including its potential applications in various sectors.
• Clemons, E. K., Dewan, R. M., Kauffman, R. J., Weber, T. A., 2017. Understanding the Information-Based Transformation of Strategy and Society. Journal of Management Information Systems. 34(2), 425–456. 1334474. This article provides a broader framework for understanding the transformative potential of information technology, which is relevant to blockchain's impact on business and society.
• Clohessy, T., Acton, T., 2019. Investigating the influence of organizational factors on blockchain adoption: An innovation theory perspective. Ind. Manag. Data Syst. 119 (7), 1457–1491. This research investigates the organizational factors that influence blockchain adoption, providing insights into the challenges of integrating blockchain into existing business processes.
• Cong, Y., Du, H., Vasarhelyi, M.A., 2018. Technological disruption in accounting and auditing. J. Emerg. Technol. Account. 15 (2), 1–10. This article examines the impact of technological disruption, including blockchain, on the fields of accounting and auditing.
• Cong, L.W., He, Z., 2019. Blockchain disruption and smart contracts. Rev. Financ. Stud. 32 (5), 1754–1797. This paper explores the potential for blockchain and smart contracts to disrupt traditional financial markets, creating new opportunities and challenges.
• Coyne, J.G., Coyne, E.M., Walker, K.B., 2016. A model to update accounting curricula for emerging technologies. J. Emerg. Technol. Acc. 13 (1), 161–169. This research proposes a model for updating accounting curricula to incorporate emerging technologies, including blockchain, to prepare future accountants for the evolving job market.
• Coyne, J.G., McMickle, P.L., 2017. Can blockchains serve an accounting purpose? J. Emerg. Technol. Acc. 14 (2), 101–111. This article explores the potential for blockchain to serve an accounting purpose, emphasizing its ability to improve transparency and auditability.
• Cuevas-Rodríguez, G., Gomez-Mejia, L.R., Wiseman, R.M., 2012. Has agency theory run its course?: Making the theory more flexible to inform the management of reward systems. Corp. Gov. 20 (6), 526–546. This paper explores agency theory, which is relevant to the governance and auditing of blockchain-based systems, as it addresses the potential conflicts of interest that can arise in decentralized environments.
• Cuomo, J., 2020. How blockchain adds trust to AI and IoT. IBM. Available at. https://www.ibm.com/blogs/blockchain/2020/08/how-blockchain-adds-trust-to-ai- and-iot/ (Accessed: 17 July 2021). This blog post discusses how blockchain can enhance trust and security in AI and IoT systems, which are becoming increasingly intertwined with financial applications.
• Dai, J., Vasarhelyi, M.A., 2017. Toward blockchain-based accounting and assurance. J. Inf. Syst. 31 (3), 5–21. This paper examines the potential for blockchain to transform accounting and assurance practices, highlighting its potential to improve efficiency, transparency, and auditability.
• de Bakker, F.G., Rasche, A., Ponte, S., 2019. Multi-stakeholder initiatives on sustainability: A cross-disciplinary review and research agenda for business ethics. Bus. Ethics Q. 29 (3), 343–383. This paper explores the role of multi-stakeholder initiatives in promoting sustainability, which is relevant to blockchain's potential to improve transparency and accountability in supply chain management.
• de Sousa, W.G., de Melo, E.R.P., Bermejo, P.H.D.S., Farias, R.A.S., Gomes, A.O., 2019. How and where is artificial intelligence in the public sector going? A literature review and research agenda. Gov. Inf. Q. 36 (4), 101392. This research examines the potential of AI in the public sector, including its intersection with blockchain, highlighting the potential for increased efficiency and transparency.
• Deloitte., 2016. Blockchain Technology A game-changer in accounting? Available at. https://www2.deloitte.com/content/dam/Deloitte/de/Documents/Innovation/ Blockchain_A game-changer in accounting.pdf (Accessed: 7 July 2020). This Deloitte report examines the potential for blockchain to revolutionize accounting practices, discussing its implications for financial reporting, transparency, and auditability.
• Deloitte., 2017. Blockchain in banking While the interest is huge, challenges remain for large scale adoption. Available at. https://www2.deloitte.com/content/dam/ Deloitte/in/Documents/strategy/in-strategy-innovation-blockchain-in-banking-noexp.pdf (Accessed: 7 July 2020). This Deloitte report examines the challenges and opportunities of blockchain adoption in the banking sector, providing insights into the potential for blockchain to transform financial services.
• Deloitte., 2020. Thriving in the era of pervasive AI Deloitte’s State of AI in the Enterprise, 3rd Edition. Available at. https://www2.deloitte.com/content/dam/ Deloitte/nl/Documents/innovatie/deloitte-nl-exec-deck-state-of-ai-in-the-enterprise-3rd-edition-final.pdf (Accessed: 19 February 2021). This Deloitte report explores the state of AI adoption in businesses, highlighting its potential to transform various industries, including accounting and auditing.
• Dong, W., Liao, S., Zhang, Z., 2018. Leveraging financial social media data for corporate fraud detection. J. Manag. Inf. Syst. 35 (2), 461–487. This research explores the use of financial social media data for fraud detection, highlighting the potential for blockchain to enhance transparency and improve fraud detection capabilities.
• Drew, J., 2018. Merging accounting with'big data'science. J. Account. 226 (1), 47–52. This article discusses the integration of 'big data' science with accounting practices, highlighting the potential for blockchain to facilitate data analysis and reporting.
• Drew, J., 2019. A different approach to applying blockchain. J. Account. 228 (4), 1–4. This article provides insights into different approaches to applying blockchain in accounting, emphasizing its potential for improving efficiency and transparency.
• Drew, J., Tysiac, K., 2020. 2020s vision: Tech transformation on tap. J. Account. 229 (1), 23–33. This article discusses the transformative potential of technology in the accounting profession, including blockchain's impact on financial reporting and audit practices.
• Du, W. (Derek), Pan, S. L., Leidner, D. E., Ying, W., 2019. Affordances, experimentation and actualization of FinTech: A blockchain implementation study. Journal of Strategic Information Systems. 28(1), 50–65. This research examines the implementation of blockchain technology in FinTech, providing insights into the challenges and opportunities of adopting blockchain in financial services.
• Faccia, A., Mosteanu, N.R., 2019. Accounting and blockchain technology: From double-entry to triple-entry. Business Manage. Rev. 10 (2), 108–116. This paper explores the potential shift from double-entry to triple-entry accounting enabled by blockchain, discussing its implications for financial reporting and auditing.
• Fanning, K., Centers, D., 2016. Blockchain and its coming impact on financial services. J. Corp. Acc. Financ. 53–57. This article examines the potential impact of blockchain on financial services, highlighting its potential to improve efficiency, transparency, and security.
• Foote, K. D., 2019. Blockchain and Artificial Intelligence: Driving the Fourth Industrial Revolution. Dataversity. Available at. https://www.dataversity.net/ blockchain-and-artificial-intelligence-driving-the-fourth-industrial-revolution/ (Accessed: 2 January 2020). This article discusses the convergence of blockchain and AI, highlighting their potential to drive the Fourth Industrial Revolution and transform various industries.
• FRC., 2018. Blockchain and the future of corporate reporting How does it measure up? Financial Reporting Council. Available at. https://www.frc.org.uk/ getattachment/58866565-ab3b-44d3-93e1-1ef7158968d5/Blockchain-and-the-future-of-corporate-reporting-how-does-it-measure-up-(June-2018).pdf (Accessed: 3 December 2019). This report from the Financial Reporting Council examines the potential for blockchain to transform corporate reporting, highlighting its implications for transparency and accountability.
• Freeman, R.E., 1984. Strategic Management: A Stakeholder Approach. Pitman, Boston. This book on stakeholder theory provides a framework for understanding the interests of various stakeholders in a business, which is relevant to the governance and auditing of blockchain-based systems.
• Freeman, R.E., 1994. Strategic Management: A Stakeholder Approach. Prentice-Hall, Englewood Cliffs, NJ. This updated edition of Freeman's work on stakeholder theory provides further insights into the importance of considering the interests of all stakeholders in organizational decision-making, relevant to the governance and auditing of blockchain-based systems.
• Giboney, J.S., Briggs, R., Nunamaker, J., 2019. Special section: Engineering artifacts and processes of information systems. J. Manag. Inf. Syst. 36 (1), 11–13. This special section of the Journal of Management Information Systems focuses on the engineering of information systems, providing insights into the development and implementation of blockchain technologies.
• Gilbert, D., 2016. Bitcoin’s Big Problem: Transaction Delays Renew Blockchain Debate. International Business Times. Available at. http://www.ibtimes.com/bitcoins- big-problem-transaction-delays-renew-blockchain-debate-2330143 (Accessed: 7 November 2019). This article discusses the challenges of scalability in blockchain, specifically focusing on the transaction delays that can occur on Bitcoin, a key issue that needs to be addressed for blockchain to achieve mainstream adoption.
• Godfrey, J., Hodgson, A., Holmes, S., 2003. Accounting Theory. 5th ed, 5th Ed. Wiley, Milton. This comprehensive textbook on accounting theory provides a foundation for understanding the theoretical principles that underlie accounting and auditing, which are relevant to the development of blockchain-based accounting systems.
• Goldstein, I., Jiang, W., Karolyi, G.A., 2019. To FinTech and beyond. Rev. Financ. Stud. 32 (5), 1647–1661. This paper explores the broader landscape of FinTech innovation, including blockchain, examining its potential to transform financial markets and create new opportunities.
• Gomber, P., Kauffman, R.J., Parker, C., Weber, B.W., 2018. On the fintech revolution: Interpreting the forces of innovation, disruption, and transformation in financial services. J. Manag. Inf. Syst. 35 (1), 220–265. This research examines the forces driving the FinTech revolution, including blockchain, providing insights into the impact of these technologies on financial services.
• Gov.UK.,2020. Guidance XBRL guide for businesses. https://www.gov.uk/government/publications/xbrl-guide-for-uk-businesses/xbrl-guide-for-uk-businesses (Accessed: 03/11/2021). This government publication provides guidance on XBRL, an XML-based language for exchanging financial data, which is relevant to the standardization and auditability of blockchain-based financial data.
• Grigg, I.,2005. Triple Entry Accounting. https://www.researchgate.net/publication/308640258_Triple_Entry_Accounting (Accessed: 18 November 2019. This paper explores the concept of triple-entry accounting, a potential accounting model enabled by blockchain, which could enhance transparency and accountability.
• Guo, Y., Liang, C., 2016. Blockchain application and outlook in the banking industry. Fin. Innov. 2 (1). This article examines the potential applications of blockchain in the banking industry, highlighting its potential to improve efficiency, transparency, and security in financial transactions.
• Hastig, G.M., Sodhi, M.S., 2020. Blockchain for supply chain traceability: Business requirements and critical success factors. Prod. Oper. Manag. 29 (4), 935–954. This research examines the use of blockchain for supply chain traceability, highlighting its potential to improve transparency and accountability in supply chains, which is relevant to the auditing of supply chain transactions.
• Hinings, B., Gegenhuber, T., Greenwood, R., 2018. Digital innovation and transformation: An institutional perspective. Inf. Organ. 28 (1), 52–61. This article examines the broader implications of digital innovation, including blockchain, on organizations and institutions, providing insights into the organizational challenges and opportunities of adopting these technologies.
• Holub, M., Johnson, J., 2018. Bitcoin research across disciplines. Information Society. 34(2), 114– 126. 1414094. This article provides an overview of research on Bitcoin, a prominent cryptocurrency that uses blockchain technology, offering insights into the technical and social aspects of blockchain.
• Hood, D., 2018. Brace yourself for AI & blockchain: There’s less threat and more opportunity in emerging technologies than many think. Account. Today 32 (1), 1–31. This article discusses the potential of AI and blockchain to transform the accounting profession, emphasizing the opportunities that these technologies present for accountants.
• Hua, X., Huang, Y., Zheng, Y., 2019. Current practices, new insights, and emerging trends of financial technologies. Ind. Manag. Data Syst. 119 (7), 1401–1410. This research examines the current practices and emerging trends in financial technologies, including blockchain, highlighting its potential to disrupt traditional financial systems and create new opportunities.
• Hughes, A., Park, A., Kietzmann, J., Archer-Brown, C., 2019. Beyond Bitcoin: What blockchain and distributed ledger technologies mean for firms. Bus. Horiz. 62 (3), 273–281. This article explores the broader implications of blockchain and DLT for businesses, highlighting its potential to transform various business processes and create new opportunities.
• Iansiti, M., Lakhani, K.R., 2017. It will take years to transform business, but the journey begins now. Harv. Bus. Rev. 95 (1), 172. This article discusses the potential for technology to transform businesses, highlighting the need for organizations to embrace change and adapt to emerging technologies, such as blockchain.
• ICAEW, 2018. Blockchain and the future of accountancy. Available at. https://www.icaew.com/technical/technology/blockchain/blockchain-articles/blockchain- and-the-accounting-perspective (Accessed: 3 December 2019). This report from the Institute of Chartered Accountants in England and Wales (ICAEW) examines the potential for blockchain to transform accountancy, highlighting its implications for the future of the profession.
• Ijiri, Y., 1967. The Foundations of Accounting Measurement. Prentice-Hall Inc, pp. 12–19. This book on accounting measurement provides a foundational understanding of accounting principles, which are relevant to the development and implementation of blockchain-based accounting systems.

Conclusion

This review highlights the significant potential of blockchain to transform accounting and auditing practices, enhancing transparency, accountability, and efficiency in financial reporting. However, challenges related to scalability, security, and regulatory frameworks need to be addressed for blockchain to achieve mainstream adoption in accounting and auditing. Further research is needed to explore the specific applications of blockchain in different accounting and auditing contexts, as well as the implications for the future of the profession.