Acct6007 : Financial Accounting Theory Assessment Answers

Download and critically analyse an academic article written by Daniel Hood. This article can be found in the Torrens University library using the following citation: 

Hood, D. (2018), Brace yourself for Al & blockchain: There's less threat and more opportunity in emerging technologies than many think Accounting Today. Vol. 32 No. 1, p1-31.3p, Database: Business Source Ultimate

Answer the following questions or topics during your analysis.

Financial Accounting Theory and Practice

Introduction:

Ever since the invention of the computers and machines, their capability of performing numerous kinds of tasks have been growing extensively. Humans have created the power of computer system based on the diverse working domains by increasing speed and reducing the size to save time (Russell &Norvig, 2016). There are two such technologies namely the artificial intelligence and block chain that has the ability of reshaping the profession of accounting. The present study is based on understanding the concept of Blockchain and Artificial Intelligence. The study would explore the current use of blockchain and artificial intelligence in accounting with probable use in accounting future. Furthermore, a description of case for each of the artificial intelligence and block chain would be used in accounting will be considered. An argumentative statement would be made to support the use of those technologies in future.

Use of Artificial Intelligence and Blockchain in accounting:

As stated by Nilsson, (2014) artificial intelligence is the science and engineering of making computer or the software that thinks intelligently in the identical manner as the human thinks. The major thrust of the artificial intelligence is the development of computer functions that is related with the human intelligence namely the reasoning, learning and solving of problem. Research associated to artificial intelligence is particularly specialized and technical. According to KPMG it has integrated the artificial Intelligence into IBM Watson for the purpose of audit and JP Morgan Chase has been using this technology for reducing the time that is required to review the contracts through numerous hours of staff to some few minutes.

Blockchain on the other hand refers to the ability of tracking and transferring value as the assets or the money in a guarded way with the real time interface on the identical lines that is used to transfer the information by using the technology that can drastically introduce changes the way business is carried out. As stated by Shyshkova, (2018) blockchainis the type of technique that is used for recording data in the form of advanced record that contains the exchanges, contracts and bills appropriated over few thousands of PCs. The advanced records are lumped together in a sequential manner to use complex calculations. Block chain is the transaction ledger that stores the records in a list format which is known as blocks. Even though money changes hand, the identifies can identify the individual parties.

According to Cohen, &Feigenbaum, (2014) by pursuing the benefits of time-stamp functions, the uses can rely on the accuracy of the records by checking whether there are any changes of technology.In an effort to change blocks an update is required for subsequent chain of blocks and hence it helps in preventing the fraudulent activities. In the profession of accounting, the block chain implications are exciting for the auditors. As blockchian has automated technology, better security and real-time verification, the auditors are required to devote most of the time in verifications, confirmations and assessment of the particular accounts (Dai &Vasarhelyi, 2017). Therefore, through blockchain performing audits becomes less expensive and time saving.

Instances of Artificial intelligence in accounting and use of blockchain in accounting:

Artificial intelligence has the ability of extracting vital terms and compiles the same to assess the information for carrying out the risks analysis or other functions. For example, business organizations generally encounter difficulties in extracting invoices, responding to revenue projection and expense accounting status (Bond & Gasser, 2014). Presumably, company Yis found to be facing issue in the above stated aspects. In such situation Pegg, can be used, as the application which is the fastest and simplest way of capturing and managing the business transactions. Pegg is the innovation of artificial intelligence as it is fastest and easy to use for sending message to any person through mobile phone.

It is additionally presumed that Company Y makes the use of Xero Accounting Software for managing the transactions in accounting. Pegg has the capability of synchronising the transactions with the Xero accounting software. This is because it helps in assessing the potential invoices and can be used to match the sum that is paid to rectify the combination of invoice (Charniak et al., 2014). As a result, it automatically generates the invoice for portraying short paymentwith no use human intervention. Furthermore, Pegg offers responses to the question associated to revenue projection and status of expenses once it is uploaded in the Pegg database. Henceforth, Pegg uses the artificial intelligence in reducing the time that is spend on the business administration.

As it is in the case of use of blockchain in accounting, an example can be cited by stating that Company X sells the product to Company Y for $10,000. The following events are stated below;

1. Recording of sales order in the accounting books of Company X and recording of purchase order in the accounting books of Company Y.
2. Recording of outward shipment of products in the accounting books of Company X and inward receipts of products in the accounting books of Company Y.
3. Recording of customer invoices in the accounting books of Company X and invoice of vendor in the accounting books of company Y.
4. Recording of inflow of payment in the accounting books of Company X and payment outflow in the accounting books of Company Y.

Using the technology of blockchainin the areas of supply chain, functions of logistics and payments, there may be instantaneous insertion of transactions validations would be made in the single distributed ledger (Anderson, 2016). All the concerned individuals may witness the state of present transaction with the common applicable documentations. Since the suitable parties havevalidated the transactions and becomes possible for the auditors to have faith in the legitimating those transactions. Any form of modifications to the transactions that is recorded requires the validations of the validators.

Argumentative view point:

As stated by Hood, (2018)Artificial Intelligence and Blockchain has more opportunities than threats. While for Artificial Intelligence it is understood that it helps the auditors in digging deep into the accounting data by processing large amount of data. Nevertheless, the accountant’s role is regarded as critical than for machines. To function efficiently, it is necessary to combine the opinion with the skills of data science. Furthermore, the accountants assure the readiness and are capable of leveraging the opportunities that is offered for artificial intelligence. Hence, the accountants would be able to improve technological skills through artificial intelligence and can provide more values in leveraging the technologies.

According to Hood, (2018) the technology of Blockchain might represent the next step for the accounting. Rather than keeping the separate records for transaction receipts, organizations can write their transactions directly in the joint register which creates an interlocking system of the enduring accounting systems. The use of blockchain makes it possible to substantiate the reliability of the electronic files. Correspondingly, a company can keep its books of accounts under blockchain, collaborating with the suppliers with the help of another blockchain whereas sales obligations can be administered by others. The local or the state tax authorities can gain the access of final blockchain in an organization (Kokina et al., 2017). Use of blockchain does not cut down the need of accountants however audits can be carried out in a different way. Arguably, blockchain and artificial intelligence is a useful tool in the profession of accounting by classifying and summarizing the information in the significant manner.

Changes in reporting regulations together with the technological advancement in accounting:

Financial reporting regulations would create a significant amount of change in future because of numerous reasons. Initially, the accountants would be using the advanced technologies for enhancing the conventional working environment with the technologies to substitute the current conventional approach (Pilkington, 2016). The advanced system of software would lend the support to the outsourcing activities and advanced technologies would improve the stakeholder improvement and collaboration. The social media would disclose the additional data such as alternative reporting in comparison to the business assurance report and which would be used by the investors for understanding the big data (Underwood, 2016). A change in regulation can also be made due to the higher tax avoidance, money laundering and transfer pricing. When technologies such as artificial intelligence and blockchainwould be employed in the profession of accounting it would lead to more improved future in financial reporting.

Conclusion:

On a conclusive note, it can be stated that from the above stated both the artificial intelligence and blockchain is gaining widespread admiration in all aspects of business and its effect on the accounting would sooner or later increase with the passage of time. The analysis also provides the theoretical examples by stating that business would improve from the technological help as this would help in managing the accounting transaction in the effective way. Nevertheless, it can be stated that technologies such as artificial intelligence and blockchain does not possess the capabilities of replacing the accountants. Alternatively, such technologies would help the accountants in performing the work of audit in the transparent manner. With the introduction of technologies profession of accounting would undergo significant amount of changes.

References:

Anderson, N. (2016). Blockchain Technology A game-changer in accounting?. Deloitte, March.

Bond, A. H., & Gasser, L. (Eds.). (2014). Readings in distributed artificial intelligence. Morgan Kaufmann.

Charniak, E., Riesbeck, C. K., McDermott, D. V., & Meehan, J. R. (2014). Artificial intelligence programming. Psychology Press.

Cohen, P. R., &Feigenbaum, E. A. (Eds.). (2014). The handbook of artificial intelligence (Vol. 3). Butterworth-Heinemann.

Dai, J., &Vasarhelyi, M. A. (2017). Toward blockchain-based accounting and assurance. Journal of Information Systems, 31(3), 5-21.

Hood, D. (2018), Brace yourself for AI & blockchain: There's less threat and more opportunity in emerging technologies than many think Accounting Today. Vol. 32 No. 1, P1-31.3p,

Kokina, J., Mancha, R., &Pachamanova, D. (2017). Blockchain: Emergent industry adoption and implications for accounting. Journal of Emerging Technologies in Accounting, 14(2), 91-100.

Nilsson, N. J. (2014). Principles of artificial intelligence. Morgan Kaufmann.

Pilkington, M. (2016). 11 Blockchain technology: principles and applications. Research handbook on digital transformations, 225.

Russell, S. J., &Norvig, P. (2016). Artificial intelligence: a modern approach. Malaysia; Pearson Education Limited,.

Shyshkova, N. (2018). Prospects for the Implementation of Blockchain in Accounting. Accounting and Finance, (2), 61-68.

Underwood, S. (2016). Blockchain beyond bitcoin. Communications of the ACM, 59(11), 15-17.