Blockchain is considered a breakthrough in technology, which is set to create transformations in accounting and auditing work. But how does this technology work and is it applicable? is the issue.
The article learns about key contents such as: Blockchain technology, operating principles, applications of Blockchain in the field of accounting and auditing in the context of current 4.0 technology application.
What is Blockchain?
Blockchain is a technology that allows the transmission of data securely based on an extremely complex encryption system, similar to a company’s accounting ledger. In this case, Blockchain is an accounting ledger that operates in the digital realm.
Blockchain possesses a special feature that is to transmit data without requiring an intermediary to confirm information. Information in the Blockchain cannot be changed and can only be added when there is a consensus of all nodes in the system. This is a highly secure system against the possibility of data theft. Even if part of the Blockchain system collapses, those computers and other nodes will continue to protect the information and keep the network going.
It can be said that Blockchain technology is a combination of three technologies: (1) Cryptography: Using public key and hash function to ensure transparency, integrity and privacy; (2) Peer-to-peer network: Each node in the network is considered as a client and also a server to store a copy of the application; (3) Game theory: All nodes participating in the system must comply with the rules of the consensus game (PoW, PoS…) and are motivated by economic motivation.
The idea of the birth of Blockchain
Derived from the problem of Byzantine Generals in computer science and dealing with reliable transmission in a hierarchical system.
The content of the problem describes: An army goes to capture the citadel and the generals are located in different positions. In which there are N loyal generals who want to capture the citadel and M traitors who want to withdraw their troops, a traitor general informs one group to attack and informs another group to withdraw troops. So how can the generals be consistent with information and capture the city together? Just one mistake in the transmission of information can cause an entire army to be annihilated. If they attack the city at the same time, they will win, otherwise they will all be destroyed.
This Byzantine generals problem has yet to be solved by anyone. Therefore, we need a third party to build trust. For example, in the above problem, there should be a third party to make an agreement for the generals to sign. If any general violates the agreement, he will be punished. The third party guarantees the capture of the city. the generals are all the same, because the generals may not trust each other but must absolutely trust this third party. This is the opening idea for a Blockchain system that can help generals trust each other more.
How does blockchain work?
Blockchain is a single ledger that records transactions between organizations, their suppliers, and their customers. As data is fed into linked “blocks”, they create an “activity record” and as information is added, blockchains are established.
Everyone with permission to join the Blockchain can see the same information in real time. You can see who added data to each block and when it was done. These blocks cannot be deleted or changed. All Blockchain users own and are responsible for maintaining the blockchain, rather than having a single person in control.
In a secure Blockchain, Blockchain users decide who can join the ledger and their access levels. Some information may be encrypted to protect commercial confidentiality. A company can have a Blockchain with their suppliers, customers, banks and with their tax authorities.
Blockchain application in the field of accounting and auditing
One thing that may be less known to people is that Blockchain technology has a great influence on the Accounting and Auditing industry and is certainly a technology trend that experts in the Finance – Accounting – Auditing industry. Mathematics cannot be underestimated in the context of the development as a weapon of the Industrial Revolution 4.0. Specifically:
Firstly, Blockchain application can help secure accounting information.
Blockchain is designed to resist data change. Information in the Blockchain cannot be changed and can only be added when there is a consensus of all nodes in the system. Even if part of the Blockchain system falls, other computers and nodes will continue to work to protect the information.
By creating a single ledger on a network of computers; their companies, customers, banks and tax authorities record and share information. When any of them add information, the ledger automatically verifies and corrects the data. Each party involved does not need to maintain their own ledger, so that accountants will not have to do all the processing and adjustment of the transaction. Blockchain creates a real-time traceability record, so if Blockchain technology is widely adopted, the role of auditors in verifying transactions made in the Blockchain will no longer be necessary. .
Second, the application of Blockchain helps to reduce the possibility of economic wrongdoing.
Blockchain technology in Accounting – Audit greatly reduces the possibility of errors when reconciling complex and disparate information from many different sources. Furthermore, accounting records cannot be edited and changed once saved to the Blockchain, even if requested by the owner of the accounting system. Because on the Blockchain platform, every daily transaction is recorded and authenticated, so the integrity of financial records is guaranteed.
Blockchain can reduce accounting errors and frauds. When a block of data is added to the chain, the rest of the network must verify that data. When you make a transaction on the chain, all the computers in the network identify you and check if you have the right to transact. So if it is necessary to pay 100 USD and you only transfer 50 USD by mistake, other blocks will point out the error.
Third, network security is tightened thanks to Blockchain technology.
A hacker would have to infiltrate an entire computer network at once to do any damage. If only one computer is attacked, other computers on the network will be able to detect and respond to the attack.
A few other applications of Blockchain technology in the Accounting – Auditing industry can be mentioned: Traceable audit evidence; Automated audit process; Transaction validation; Track property ownership; Smart contracts; Registration and inventory system for any asset, from raw materials to intellectual property.
Blockchain application solutions in the field of accounting and auditing
Research by Juniper Research predicts that, by 2030, applying Blockchain technology can save financial institutions more than $27 billion. Application solutions for Vietnamese enterprises in general and the field of accounting and auditing in particular can be devised, including:
Firstly, updating Blockchain technology for accountants and auditors through training programs.
To promote the application of this technology in the field of accounting and auditing, accountants and auditors need to be knowledgeable about this application. With the goal of leading technology in financial institutions around the world, in 2018, PwC announced its new audit service based on this technology platform to encourage customers to access new solutions, allowing service users to view, check and track transactions on Blockchain in real time.
Besides PwC, the Institute of Chartered Accountants of England and Wales has also incorporated Blockchain and a number of other key technology trends into its training content. However, in order to capture the opportunities presented by these developments, accountants must stay up to date with the trends of these changes to the industry, familiarize themselves with new concepts such as data and data. Big Data, cryptography, ledger system (Blockchain), payment system, payment via mobile devices and new platforms connecting financial service providers and users …
Thus, in order to create a competitive advantage for yourself in the field of accounting-auditing in the future labor market, in addition to professional knowledge, it is necessary to update information about technology as well as new applications. into the working environment of the industry.
Second, building companies that provide Blockchain technology applications in accounting and auditing.
Recently, many businesses have become interested in applying Blockchain to what extent, how to bring business value, where to start, and how. In fact, the programming tools of Blockchain projects are still limited, making it difficult to realize the ideas of applying blockchain technology. Advanced Blockchain projects need to solve this problem, need complete programming tools to support application developers. With the goal of breaking down barriers in the application of Blockchain technology in the field of accounting and auditing for businesses, it is necessary to have professional organizations to provide services, technology platforms and tools to support Helping traditional businesses in Vietnam access Blockchain technology in the safest, fastest and most effective way.
Typically, a number of Vietnamese technology startups such as Vakaxa, AChain, Kambaria, Kyber Network, etc. have built effective Blockchain platforms, attracting great attention and investment from the community. Blockchain coin worldwide. This is an opportunity for Vietnam to embrace the application of Blockchain technology, in order to cut costs, improve operational efficiency, and help Vietnamese enterprises compete with foreign enterprises.
Third, Blockchain application on accounting software
Currently, the use of accounting software in operations is no longer strange to any business in Vietnam. The combination of Blockchain technology on accounting software will help accounting work at enterprises to optimize the security, safety and transparency of accounting information. Most recently, the application of Blockchain technology has been deployed on electronic invoice software. Pioneering in service development of solutions and applications of Blockchain technology on electronic invoice software is MISA. MISA develops MeInvoice.vn – The first e-invoice solution in Vietnam that applies Blockchain technology to help increase the security, safety and transparency of invoices for businesses. Blockchain technology on MeInvoice is understood as a ledger, record the entire status and fully update the invoice information so that the participating parties can check and verify the information. In the coming time, accounting software companies should exploit more deeply the applications of Blockchain not only on electronic invoice software but also on accounting software.
In summary, in the context of the “booming” Industrial Revolution 4.0 in Vietnam, accountants and auditors consider how they work and can provide clients with valuable work products. Higher levels involve insight and strategic thinking. Blockchain can open a lot of doors of opportunities for the Accounting – Auditing industry in the future.