Globalization 4.0: How Blockchain influences Accounting & Accountability in the Digital Age

T echnology has been developing at an exponential rate and it is happening now. It has had a big impact on the way we live our personal lives, and the effect on the ways we work has been even greater. Over the years, technology has changed how we manage many different aspects of business operations. Accounting and taxation is no exception. A panoply of areas are affected. From accounting to tax but yet also the epistemology of accounting and its concept of what can be considered as accountability has been changed fundamentally. This article presents a holistic view on how technology influenced various field of accounting principles and practices from an epistemological point of view. This is firstly to understand the developments within the practice of accounting and secondly to exhibit the broad impact of technological advancements on this profession.

The digital revolution in particular which is still unfolding before our eyes, has had impact on the very nature of the work for accountants and furthermore forced researchers and other stakeholders to struggle with several new threats. New technologies disrupt traditional areas and accounting no exception. Throughout history there occurred several mile stones changing accounting fundamentally. Blockchain technology as a part of computerization has the potential to furthermore disrupt accounting practice, research and the concept of accountability.

Accountability is a wider term for accepting responsibility in the past and now. It is a concept sought after but it is elusive15. Research generally does not argue with the need for accountability but how accountability is defined seems to be far from resolved. The concept of accountability derives from old french for comptes à rendre, which is translated to rendering of accounts16. Often, definition of accounting include information and sanctions. Accountability can be characterized in a number of ways but its basic concept is the giving and demanding of reasons for conduct17. Its growing popularity since all five types of accountability are affected by the ongoing process of digitalization namely (i) political accountability, a concept vesting responsibility in public servants; (ii) managerial accountability, often construed as a combination of administrative, bureaucratic accountability in a hierarchical structure; (iii) public accountability is understood as a rather informal yet direct accountability to the public interest; (iv) professional accountability invokes the sense of duty that one has as a member of a professional or expert group; (v) personal accountability is fidelity to personal conscience in basic values for example the respect to human dignity18.

Since accountability is a relational term, a person or organization has to be accountable to someone else and depends on the matter of degree. Therefore, accountability is an assurance that an individual or an organization will be evaluated on their performance or behavior related to something for which they are responsible. How accountability is defined has changed, underlining the importance of language as agent of ideology in shaping understanding. However, research showed that there are several definitions available. For example accountability is presupposed agreement about what constitutes an acceptable performance19. Accountants on the other hand treat accountability as if it is a financial or numerical matter, political scientists view accountability as a political imperative whereas legal scholars see accountability as a shared agreement. When we look at accountability from a fiscal angle it is a measure whether money has been spent as agreed or according to a projected budget. Thus, it can be said that there is a diverged perception of what constitutes accountability which is simultaneously influenced by multiple factors making it difficult developing a general concept. This hypothesis is supported by the study by Morgan (1988) showing that being accountable is rather an interpretive act20 trying to explain the link between accountability and being accountable. This analysis visualize the contradictions accountability brings with it. Thus the accountability can be seen as a chameleon-like concept. A reality continually constructed, shaped by several outside factors, which is not always positive.

The relationship between accounting and accountability is much more at stake. Not only financial managers but all managers require a concept to act upon. Actions should become answerable going hand in hand with progressing modernization21. Different styles of accountability can be captures in some ways in which contemporary public discourse can become aligned with the rhetoric practice of specific organizations. In other words, business process has an impact on the management style and management the style then influences the concept of accountability. The question if this is effective and efficient and if there is a better, alternative definition remains. Sure is, accounting has come to an ever more significant position in the functioning of modern post-industrial society because it plays a key role in the overall functioning organization22.

When taking a look onto accountability in regards to digitalization it means that every user of a time stamping service can reliably verify that the service operates in the intended way (e.g., information provided by the service agrees with the information it provided to other users). The research of Sinclair (1995) shows that accountability exists in many forms and is changing depending on its context but also what people see in it changes.

Technology in form of software has the means to standardize accountability to some extent. In particular, Blockchain technology is a type of software which allows digital information to be distributed but not copied using cryptographies by distributing ledgers that can record transactions between two parties efficiently, verifiable and permanent way23. If verification fails, the user has a proof of service’s malicious behavior, which could be used to hold the service accountable. While accounting plays a vital role in any social structure it is surprising that so little is known. No matter which country we look at, there is always a problem with honesty in regards to accountability. People are not always honest and powerful positions are abused for personal gain. The use of new software and instruments, i.e. Blockchain has the chance to fundamentally change the rules and structures and hence affect accountability. It provides a tool so that a there is the possibility for trustless exchange as data is consistent, timestamped, transparent and immutable. In other words, there is an absolute guarantee that an interaction which is recorded on the blockchain was performed.

For example, if two parties sign a blockchain-based contract there is a guarantee that this contract will be executed. This technology could be a way to standardize accountability a bit more in a way that accountability is in some way automated. Domestic and international commerce is increasing since the world gets even closer. Better ways of accountability are required. The past shows that corruption takes place on various levels thus the accountability of today appears to be broken24. The blockchain technology can crate a whole new layer of trust and thus also accountability. This however on the other hand also triggers further accountability problems25. One problem is that if a false statement is on the blockchain it cannot be changed anymore and accountability is at stake. Further propositions on how to avoid this case are currently explored in empirical research. Bottom line, blockchain technology will influence the concept of accountability and could provide a new tool to reduce fraud, avoid error but more over force accountability in many areas26.

Tilmar Goos

Ph.D Researcher in the Digital Economy — specialization in tax and accounting at Universidade do Minho

Legal Counsel at Cardano Foundation.

Visiting Research Scholar at IBFD Amsterdam and German Library of Economics


Tilmar Goos

15 Sinclair, A. (1995). The Chameleon of Accountability: Forms and Discourses. Accounting Organization and Society, Vol. 20, No 2/3, p.219–237.

16 Dubnik, M. J. (1998). Clarifying Accountability: An Ethical Theory Framework. In N. Preston, Routledge Studies in Governance and Public Policy (pp. 68–81). New York: Routledge.

17 Roberts, J., & Scapens, R. (1985). Accounting Systems and Systems of Accountability — Undertanding accounting practices in their organisational contexts. Accounting Organization and Society, p. 355–368.

18 Ibid; Jabbra, J. G., & Dwivedi, 0. (1989). Public Service Accountability: A Comparative Perspective. Hartford: Kumarian Press.

19 Day, P., & Klein, R. (1987). The concept of accountability: Five public services; Steward, J. D. (1984). The role of information in public accountability. In A. Hopwood, & C. Tomkins, Issues in public sector accounting (pp. p. 13–34). Oxford.

20 Morgan, G. (1988). Accounting is reality construction: Towards a new eistemology for accounting practice. Accounting Organization and Society, pp. 477–485.

21 Ahrens, T. (1996). Styles of Accountability. Accounting Organizations and Society, pp. Vol. 21 №2/3, pp. 139–173

22 Hopwood, A. G. (1983). On trying to study accounting in the context in which it operates. Accounting Organizations and Society, pp. Vol. 8, No 2/3, pp. 287–305.

23 Iansiti, M., & Lakhani, K. R. (2017, January). The Truth About Blockchain. Harvard Business Review.

24 Papi, F. G., Hübner, J. F et. al. (2017). Intrumenting Accountability in MAS with Blockchain. Brazil.
25 Herlihy, M., & Moir, M. (July 2016). Blockchains and the logic of accountability. Symposium onLogic in Computer Science, (pp. 27–30). New York.

26 Boucher, P., Nascimento, S., & Kritikos, M. (2017). How blockchain technology could change our lives. Brussel: Europeans ParliamentaryResearch Service.

Redefining Finance with SEBA Bank AG | PhD Accounting, Data Science, Blockchain & Digital Ethics