How blockchain technology is impacting accounting [Podcast]

Dr. Sean Stein Smith is an assistant professor at Lehman College, a member of the AICPA Leadership Class of 2017, and an Inc. Magazine columnist. He was also recently recognized by CPA Practice Advisor on their list of the top 40 under 40 accounting professionals to watch in 2017. His work and analysis of accounting, blockchain technology, and the evolution of the accounting profession has been featured in numerous practitioner and academic publications. Sean has presented on a variety of accounting, finance, and technology topics at the state and national levels and was named a Young Professional of the Year by the IMA in 2016. 

I recently had the opportunity to interview Sean for the Sage Advice podcast and discuss how the accounting field, both on the audit advisory side and on the tax side as well, are going to change and evolve. You can listen here or read an edited version of the interview below.

How did you get into the accounting profession, Sean?

When you are a kid they always ask you, “What do you want to be when you grow up?” The answer that I always gave was that I wanted to own a bank. I figured banks had the money, so if you owned a bank, you were going to be in good shape. The overall interest in accounting, finance, and how business works I just built off of that.

We’ve been hearing a lot about blockchain lately, but what is going to be the impact on accounting and the accounting profession?

Obviously right now blockchain and Bitcoin are both hot buzzwords. Everyone is talking about it. Some firms on the market that are just adding blockchain into their name that are going up 85% to 100% overnight. I think drilling down into what the applications and tools that blockchain will change in the accounting field can be boiled down to, I think, two or three areas.

1. If you work in an audit or an assurance area, you are going to have more access to more information on a continuous basis. The overall audit tactic of going in and doing a sample or doing confirmations, all of that is going to change and will become more of an overall comprehensive audit that is able to be done on an ongoing basis.
2. Building on the reality that in a blockchain, whether it’s a private blockchain or a consortium blockchain, that information, it can be operational, it can be environmental, or it can be a financial type of information. All of the information that an organization has and creates on an ongoing basis is going to be able to be uploaded onto that. That area, I think, is an exciting opportunity that is going to be able to then tie the evolution of how companies actually document and then report their information a more comprehensive basis. I’m talking about environmental issues, employee training, all of that data is going to be on the blockchain.
3. The final point, that really is going to drive some of these changes is that if the blockchain is up and running, information after it’s been added onto the blockchain, given its hash ID and approved by the other members in that network, it is instantly available to all of the members in the chain, in the system. Then it’s also going to be available to any external parties, such as auditors, advisors, or the SEC in that same instantaneous manner. It is going to create much more dialogue and interaction, I think, on the part of accountants and other external advisors with their servicing.

It’s pretty clear that blockchain is going to have an impact on the accounting profession. I’m curious as to your thoughts on one of the implementations of blockchain, that of course, is Bitcoin. Do you think that there’s a space for cryptocurrencies? Or do you just think it’s blockchain that’s going to be having the major impact?

You know, Ed, I can’t tell you how many times over the last couple of months I’ve heard that question. I do think that there is a room for a cryptocurrency or a digital currency. I think right now, it’s awfully tough to try to estimate or forecast whether it’s going to be Ripple, Ethereum, Bitcoin, or it’s some outside party or a government is going to introduce their own version of these tools to try to establish more regulation in the area. But there is a lot of uncertainty right now in the area, but I would say with a great deal of confidence that yes, I do believe that there are a home and a purpose for an asset like Bitcoin.

Want to hear more from Sean? Read his blog posts on Sage Advice.