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Possible challenges for accountants in the ‘’digital’’ era

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Possible challenges for accountants in the ‘’digital’’ eraAbstract:

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Content

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1.Introduction1

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2.Methods and Research Plan43.Literature Review1

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3.1What challenges dose digitization accounting faced2

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3.1.1Big data and big data analysis3

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3.1.2Cloud6

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3.1.3Artificial Intelligence63.1.4The combination trend of big data, cloud computing and artificial intelligence6

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3.2The impact brought by Bitcoin on accounting 5

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3.2.1The impact of blockchain on accounting6

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3.2.2Impacts of the blockchain on currencies6

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3.3Attitude to digital accounting23.4Challenges and future of digital accounting2

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3.5Discuss and Analysis2

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4.Limitations and future research directions4

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5.Appendix4

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6.Reference4

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Introduction

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The accounting profession has been one that has maintained traditions and a rich heritage of operational management, rules, and principles. The mode of operations that guide the profession has, for a long time, remained the same, including the establishment of rules and expectations for accountants. However, the introduction of the Internet and the consequent results of globalization have interrupted the business profession, and introduced new rules, regulations, expectations, and principles for accountants. Today, numerous technological advancements, stronger regulations, innovations, and the digitalization of the profession have slowly eaten into the traditions that previously defined the sector. While these advancements in technology have been reviewed by Stanciu and Gheorghe (2017) to be an advantage for the accounting profession, Rîndașu (2017) established a number of challenges that the accounting profession continues to face, including an ever-changing accounting environment and introduction of new conventions in the conduct of business. Challenges for accountants in this digital era are reflective of a need to adapt rapidly and transform business processes and practice without necessarily abandoning basic accounting principles and rules.

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The field of accounting comprises of professional accounting staff and any other groups of people aligned to the finance branch of a firm dealing with financial reporting and everything in between. Traditionally, their work has remained fairly the same with the same alternating roles and cycles each year. Nonetheless, the digital era, which has seen organizations transform tremendously, has also changed accounting standards and expectations. The digital age has reshaped the environment of finance and accounting. For instance, auditing and financial reporting have changed to appeal to a wider global audience, including shareholders in different countries and other stakeholders. Today, accountants have heavier workloads because of the introduction of finance data and other forms of information required to fill the gap introduced by globalization and digitalization of organizational functions. Even with these changes, MoÅŸteanu & Faccia (2020 is convinced that digital technologies in the finance and accounting sector could become an opportunity rather than a threat to the future of accounting.

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Digital technologies have had a serious impact on the competitive and strategic aims of companies all over the world. Specifically, CGMA (2018) points to how these technological advancements have disrupted business models employed by organizations, their competitive advantages, and the approaches of companies towards their markets. The accounting information and management has not been spared either, because these changes have swept entire organizations and the way of doing business. The management and control systems have had to adapt to new accounting demands and changes. For example, the accounting profession now demands that accountants be conversant with multiple accounting standards in line with all of the areas where their organizations operate. Such new demands have posed challenges to the accounting profession including the need to familiarize with new rules and regulations. The accounting industry is therefore one that is transitioning in order to fit and align with the demands of the digital era. As a consequence of technological advancements and developments, the coverage of the accounting profession is changing, not just in the performance of tasks but also in the way accounting information is supposed to reach stakeholders (Al-Htaybat, von Alberti-Alhtaybat, & Alhatabat, 2018). The development of the digital age and the technological innovations that have accompanied it have brought about changes that cover accounting procedures, accountancy rules, and the roles and responsibilities of an accountant. Changes and updates brought about by digitalization of the profession pose both challenges, opportunities, and benefits. Arguably, these aspects can be translated as a very challenging environment for accountants as they prepare to face a new world and to make changes and adaptations to the rising demands of their profession. These challenges will define the next decade and beyond for accountants and propel an age where digitalization and accountancy are intertwined.

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Despite the knowledge gap that exists in the attempt to quantify the changes that have faced the accounting profession, only a handful of research articles and papers have focused on providing solutions for the next generation of accountants (Stancheva-Todorova, 2018). Therefore, the current research intends to introduce the consequences of technological advancements and digitalization of the accounting profession and the possible challenges that these changes pose for accountants. The research questions are as follows:

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How does digitization affect accounting organizations, including the goal of organizations and the enthusiasm to participate in reform?

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What is the difference between changes for public accounting organizations and private organizations?

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What challenges might the issuance of digital currencies pose to accounting?

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Methods and Research Plan

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The main aim of this research paper is to systemize and analyze the major challenges that accountants face as a result of digitalization of processes and an era of digital transformations. The research will be based on a qualitative approach of reviewing extant and relevant literature relating to the profession. The research has chosen a qualitative approach and the use of secondary sources in order to utilize what has already been mentioned by other scholars and get a chance to contribute to enriching the area with new findings.

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Specifically, the paper’s qualitative approach will use a narrative strategy to weave together a sequence of major events, conduct in-depth analysis of secondary research, read case studies, document what has already been established from reliable sources, and mention themes relevant to the said changes to the profession. Interviews and secondary data will be used as a way of collecting data. Individuals who have had to transition from the old system and those who are already familiar with new accounting standards will be used for data collection.

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The qualitative approach has been chosen for a myriad of reasons, chief among these the fact that it will be possible to understand the attitudes of people in the accounting profession and getting to know the real issues they face from their point of view. Additionally, the approach is likely to generate more content through following up on genuine ideas (Archibald, Ambagtsheer, Casey, and Lawless, 2019). The ideas and themes will then be converted into data. The qualitative approach will also provide insight specific to the accounting industry. Today, accountants are expected to work and process information in a new digital era of engaging with stakeholders and creating relationships. These factors will be used to create data that is important for the research paper. Watkins (2017) also mentions that the qualitative approach allows for creativity as a driving force in order to gather participant opinions and attitudes. It allows the research to focus on observations instead of reporting on creativity. Such a format will eliminate any form of biasness that tends to be seen in data collection as respondents answer questions in a manner that pleases the researcher. The qualitative approach will encourage respondents to be themselves and answer the research questions with honesty (Archibald et al. 2019). The process will be an open-ended effort eliminating the conventional human need to answer questions in a way that is right or befitting of a situation. Therefore, the main advantage is that the qualitative process incorporates individual experiences in the accounting profession, to document the challenges that these professions face with the technological advancements in the profession.

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3. Literature review

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3.1 Digitization of the Accounting Profession

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3.1.1 Big data and big data analysisDigitization was marked by the third industrial revolution, also known as Industry 3.0. It is important to note that digitization does not include just one technology but rather a series of interconnected technologies in the use of computers and internet. It includes the use of big data, cloud computing, artificial intelligence, and blockchain technology. The original digitization from paper shift to computer records. Melnyk et al. (2020) studied the influence of modern technologies on accounting professionals and defined digitization as the automation of accounting standards, which can be divided into unified software and customized software. In terms of the use of technologies in accounting, the manufacturing corporations use enterprise resource planning (ERP), which means manual calculation shift to machines calculation. The application of ERP not only records the production number, but also analyzes the products process. In other words, capability in data collection and data analysis promote the growth and development of accounting.

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-158751757680Figure 1 The difference between hand computation and computing when collecting data. Source: ERP guidance

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Figure 1 The difference between hand computation and computing when collecting data. Source: ERP guidance

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Figure 1 above shows the contents that shift from hand records to computer records in collecting data. It is obviously in the early stage

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when using software. Software collects more information including system data, that is, the invisible information, which will affect the system in performing calculations. For the accounting department, considering the benefits is greater than costs, will trend to not use the system in the list. However, from in the long-term, using the new system looks strategic. For example, the report from ERP incorporated demonstrates their clients is large and medium enterprises instead of small business or self-employed. For accountants that use the software, need to get over the mindset of using new technologies.

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While big data is noted to have several advantages, one of the challenges that big data brings to accounting is huge amount of data, which including different data types. There are flooded with information, not only the accounting information, but also the non-accounting information, these data types may not all be structural information. As a result, accountants are required to identify and analyze these unstructured data types because computers are unable to interact with some formats such as data from pictures and video. Touching big data means accountants will collect large data than before, which will increase their workload. In addition, when accountants interact with data through computers, the first thing need to do is translate the questions into the information that the computer can understand. It looks like staff need to learn about the specifications like computer programming. Fortunately, interactive systems provide easy method. In an interactive system, the actions by users are automatic translated into words that computer can read.

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3.1.2 Cloud

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This part discusses the impact of cloud storage and cloud analysis on the development of accounting. Cloud technology is related to the Internet. Accountants record the accounting events before emerging of Internet. If go back to the origin of accounting, primitive people knotted ropes to keep track of the number of transactions. But the application of cloud is convenient for accountant recording the events, it can be recorded by a variety of different devices. Cloud computing, from the study by Dimitriu & Matei (2014), is a huge computing resource pool that aids in the interconnectedness of information relevant to the growth of a firm. Cloud computing provides solutions to the issues relevant to the smooth running of the accounting function of a firm by availing information anywhere and on multiple devices for a number of users.

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Where should the accounting data be stored? At first, accountants recorded accounting information in accounting books, including journals, subsidiary ledgers and general ledgers, they convert accounting matters into digitally recorded data. But the early computers are different from modern computers because that were only used for calculation, which did not have the storage functions. So, accountants would save the data by magnetic media (tapes and disks etc) after the calculation completed. Today, cloud computing and other forms of computerized information storage platforms enable accountants to not only apply the benefits of increased space size but also the convenience of getting information on the go.

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How are accounting data storage and cloud storage connected? The process does not happen overnight. Dimitriu & Matei (2015) mentioned that the company uses accounting information recorded by software. After purchasing the accounting software, the enterprise downloads it to own server that could control the accounting system by a host, that is to say, the accounting information is stored on the server of the company’s host. However, cloud storage data is stored on the web. Compared with former, cloud storage providers may set the virtual servers on the internet that customers cannot find. Interestingly, although some academic literature mentioned the importance of the Internet to cloud storage (Defelice & Leon, 2010), few literature mentions that traditional accounting software also needs network support. For example, the accounting department of a small company has bought 11 computers to management. One as the host computer to save and control all accounting data, others downloaded the accounting software that controlled by 10 accountants, they connect different department accounting data and responsible for data update. When the accounting supervisor needs to synchronize data to the host from other computers, it is fairly easy using modern digital technology.

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A question emerges on how cloud computing affects the accounting process. According to Stanciu & Gheorghe (2017), cloud computing “as a server” is different than traditional accounting software. Using the previous scenario, the company’s accounting department has one computer to host and ten computers to manage the traditional accounting software. The server handles a lot of accounting business during peak seasons. However, the host is also idle during off-season. Nevertheless, the company still needs to perform routine maintenance on the machine. This case can be used to explain that why the purchase of cloud computing is the purchase of a “service”, but the purchase of traditional accounting software is the purchase of a “product”. In general, cloud computing as a service, the accounting department only pay the monthly subscription fee, but they need to pay to maintain and repair the hardware and ensure efficiency of the entire accounting system. In other words, the use of cloud computing eliminates the need for companies to deal with the accounting infrastructure.

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The combination of cloud computing and accounting can be seen as a change in accounting outsourcing (Al-Htaybat, von Alberti-Alhtaybat, & Alhatabat, 2018). Cloud computing cannot replace the accounting outsourcing companies, it is the bridge to connect the team through Application Programming Interface (API). That is, when outsourcing accounting firms using cloud computing, at least two benefits can be achieved; timely response in updating data from the web and the other advantage is getting rid of the software requirements of traditional accounting software, if accounting outsourcing firms want to access the accounting data, they do not need to download specific software, just through a third party, which stands for the cloud resellers. They store the data in the virtual server, and the server is controlled by the cloud resellers. Askary, Abu-Ghazaleh, & Tahat (2018) pointed out in his research that if the cloud dealer goes bankrupt, the users of cloud computing need to consider how to migrate their data from the dealer.

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Although the literature review of cloud computing and accounting in this article has been evaluated by comparison with traditional accounting software so far, the form of cloud computing not only be built on accounting software, but also on platform or infrastructure. Jaiswal, R. and Jaiswal, K.S explained that it is more convenient to use the concept of “software as a server” (SAAS) to explain the combination of cloud computing in accounting applications. Some scholars enumerated the accounting application of “infrastructure as a server” (Borthick & Pennington, 2017). It is important to mention why scholars need to classify so many types of cloud computing services. It can be understood that difference size companies using those services to manage accounting business. On the other words, they involve the degrees of accounting outsourcing. The accounting department of small companies prefer to choose the combination with SAAS, However, the big companies would like to combination with PAAS. In addition, Jasim & Raewf (2020) mentioned that accounting outsourcing is affected in different countries, he cited the example about China and pointed out that Chinese enterprises are resistant to using accounting outsourcing.

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3.1.3 Artificial Intelligence

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This part will combination the artificial intelligence (AI) technology in accounting to discuss the conflict and fusion between the two disciplines, how the technology changing the accounting development.

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Firstly, it is significant to discuss how did artificial intelligence develop into the accounting field? It is obviously accounting will be combination with different technologies, the changes always about the technical level rather than accounting method level (from single-entry bookkeeping to double-entry bookkeeping is the revolution in accounting method). Additionally, the new technology also changes the content and structure in accounting information ( ). For example, due to the application of artificial intelligence, the labour cost decreasing while machine cost increasing, that changing the management accounting content of calculation.

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CGMA (2018) defined artificial intelligence that including “learn”, instead of automating repetitive tasks by writing fixed codes. For the literature on the combination of artificial intelligence and accounting applications, some scholars discussed the impact of artificial intelligence and automation (Fuller & Markelevich, 2020), but some discussed how artificial intelligence and accounting can be combined from identification and learning. For example, some designs refer to a neural network and management accounting, the biggest difference between automatic and repetitive work is the comparison of supervised.

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1384302310130Figure 2 Changes in artificial intelligence algorithms, source: Helfaya, 2019)

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Figure 2 Changes in artificial intelligence algorithms, source: Helfaya, 2019)

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2622552677160Figure 3 Changes in artificial intelligence algorithms, source: (Helfaya, 2019)

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Figure 3 Changes in artificial intelligence algorithms, source: (Helfaya, 2019)

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Figure 2 and 3 shows the flow of artificial intelligence algorithm, it can be seen Figure 3 has been improved on the basis of 2. For management accounting, the application of this algorithm in practice adds creative management accounting methods. Next, this article will compare Figure 2 and 3 in more depth. How the artificial intelligence changes the management accounting? Thinking of the neurons in Figure 2 as the accounting elements in management accounting. These neurons have interlinked relationships with already solved management accounting problems, and when the accountants input the accounting elements, the machine outputs the relevant management accounting solutions through the connects of the neurons, which build on problem solutions that have already been solved in the past, however, the AI model in Figure 3 compares the results with the objectives of management accounting after outputting the results, then make adjustments to the output.

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In other words, if artificial intelligence neural networks are applied to develop accounting software, the software can not only automatic the output of management accounting problems from historical solved data, it is also possible to adapt the output based on adjustment to solve some new problems to some extent, which is a deeper application for AI accounting (Jasim & Raewf, 2020). The combination of management accounting and artificial intelligence sounds so good, but on the one hand, there is a limited amount of interdisciplinary literature on accounting and AI, and it is not just artificial neural network and management accounting could be matched, it is worth researching to combine other supervised learning algorithms and accounting knowledge. On the other hand, some academics have offered negative views on the role of AI for management accounting (Khanom, 2017). They mentioned that the convenient “self-service” systems that analyse company situations like the use of software storing historical professional accounting knowledge and analysing new cases through AI, the “self-service” is a threat to the careers of accountants. So, there is now a clear fact that AI has evolved and permeated applications, and the design principles of AI in solving accounting problems have been discussed in earlier sections of this paper.

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Secondly, another thing that needs to be discussed is whether AI is driving the transformation of the accounting of the accounting profession? What aspects of the accounting profession are being driven by AI? Transformation needs to be supported by intrinsic motivation, for example, the first computer appeared due to the need for a large amount of digital decryption work during World War II. For the management accountants, the ever-improving analytical capabilities of AI put them at risk of being replaced by analytical software, or, in the future, there will no longer be a profession of management accountant (Khanh, 2018). However, Moll & Yigitbasioglu (2019) divided the accounting profession with two categories, in the background of industry 4.0 and the potential careers in the future, the connection between two types accounting careers mean that the profession of management accounting is not going to disappear. In addition, Qasim & Kharbat (2020) specifically mentioned the occupation of programmer among the occupations related to accounting. On the other side of the coin, the role of programmers in the accounting profession is not diminishing, and the impact of AI on the accounting profession may cause some accountants who were meant to work in accounting to learn program.

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3.1.4 The combination trend of big data, cloud computing and artificial intelligence

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Finance is a backbone of every global business entity. Despite the challenging nature of the accounting industry, it is one that must exist as long as businesses are in operations. According to Qasim and Kharbat (2020), there is a growing focus on big data, cloud computing, and artificial intelligence in the field of accounting, with more firms turning to artificial intelligence, big data, and cloud computing for accountancy solutions. Despite a popular belief that artificial intelligence and related digital technologies are a thing for the future, accounting firms are already using provisions of these elements to make it easier to perform accounting work (Jasim & Raewf, 2020). For example, firms are already importing resources and creating applications using software as a part of the trends defining 21st century accounting procedures. Accountants are now able to save money and time and offer insights using AI-enabled programs and systems. Additionally, Khanh (2018) found that organizations are turning to AI, cloud computing, and big data as a way of gaining an upper hand to remain competitive and attract the next generation of top talent and customers.

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The trends that have influenced global acceptance of big data, AI, and cloud computing use in the workplace have also affected the accounting profession and the expectations that customers and partners have on accountants. Liu, Wu, and Xu (2019) projected that AI and other digital technologies have ushered in a new era of accounting efficiency and productivity. AI, for example, is noted by Fuller and Markelevich (2020) to reduce the time taken to complete accounting tasks by more than 80%. AI, cloud computing and big data are new avenues that are digitalizing an industry that has previously relied on human accuracy. Today, the efficiency of accountants has improved significantly owing to the use of computerized processes. As these trends catch on even for smaller firms, it is expected that accountants will have to familiarize with cloud computing, big data use, and the trends that are improving the performance of firms in AI.

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Trends in AI, big data, and cloud computing use in accounting duties and for the entire profession have highlighted the need to change the human mindset. According to a research by Moll and Yigitbasioglu (2019), a majority of modern-day executives understand and appreciate the fact that AI and other related technologies will help companies attain and sustain competitive advantages in merging the different needs of the organization with the accounting function. As technology becomes more sophisticated, insights in AI, the use of big data, and cloud computing will set the pace for the next generation of accountants and will also redefine the relationship between the industry and the stakeholders. It is likely that the future will see heavy usage of AI, cloud computing, and a combination of these elements in synthesizing and adapting to changes that will occur in the accounting profession. Trends in use of big data, the proliferation of cloud computing and AI are all functions that will reintroduce changes regarding savings on cost and time to expand the ability of accountants in the future.

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3.2 The impact brought by Bitcoin on accounting

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3.2.1 The impact of blockchain on accounting

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Accountants record the currencies usage, there are a varieties of currencies forms such as shells, which were officially certified. However, the emerging of Bitcoin were significant than before, it contains the online technological revolution. In other words, it is not only a monetary change, but also a technology change, the blockchain effect the accounting industry, which were started from Bitcoin. So the impact of digitalization on accounting will be discussed in the these terms as well. Firstly, the study will discuss the impact of blockchain on accounting just focus on technologies levels, the second part will extend the impact of blockchain on currencies, which including digital private (Bitcoin is the typical example of private currencies) and central bank digital currency (CBDC).

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Blockchain can be linked with cloud computing and the Internet of Things. Regarding the blockchain, there are basic technical terms such as node, and other terms that have been expanded on blockchain technology such as Hyperledger. In essence, a blockchain is a chain formed by the combination of nodes. Further, when it comes to how to create nodes? It can be understood that nodes can be created by setting up a server in any place, which is similar with the server distribution of “cloud computing” (but this place needs to have a network and the infrastructure for building a server, for example, a computer is the infrastructure for building a server). However, It is worth noting that blockchain has more features than cloud computing such as smart contract and consensus mechanism. In addition, the blockchain has no administrator, it is completely decentralized (Rîndașu, 2017), while this is the biggest difference with big data management and cloud computing.

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From an accounting ledger perspective, the use of blockchain helps with ledger reconciliation. It involves Hyperledger. For example, a company’s supply chain has multiple agency reconciliations, and due to various real-life situations, the agencies may not have the same number of accounts, in other words, the data does not match, requiring corporate reconciliations. But the problem with traditional reconciliation methods is that a third-party organisation acting as a common witness to multiple organisation’s reconciliations is not necessarily trusted by all the reconciling organisations on the one hand, and on the other hand, hiring a third party organisation for endorsement and setting up accounting account permissions on IT increases the total cost of reconciliation. But when the technology of the ledger and blockchain are combined, the smart contract is partially fulfilled by the code, meaning that the consensus on the ledger standard shifts from a consensus on people and institutions to a consensus on the code.

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3.2.2 Impacts of the Blockchain on Currencies

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From the technological perspective, blockchain technology is likely to impact accounting, primarily through record keeping. Specifically, the blockchain is concerned with the recording keeping regarding how the transactions are initiated and the records are reported. It is essential to learn that through the technology, the blockchain has been essential in the changes and the transformation of the business models and activities that in turn changes the back face activities such as the tax presentation and financial reporting. Notable is that through blockchain technology, the auditor is in the position to change their execution. Specifically, the CPA will be compelled to make their skills broad enough so that there can be conformity with the technique to conform to the execution of the auditors (Smith, 2018). From the technological perspective, blockchain such as bitcoin has created impactful aspects of the financial sector, particularly crypto currency. Even though not connected to the technological elements, the blockchain impacts the financial sector from the government institutions and the banking sector as it has created the space at which a different form of the transaction can be exploited. Thus, it is essential to identify from the technological perspective that the blockchain concept has been necessary for the transformation of the financial sector through bringing a unique and

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