FAQ: What is Blockchain and How Does it Impact Me?

By Jack Castonguay

With the influx of new technologies, we know that the role of each accountant professional is changing. But with terms like ‘Blockchain’ and ‘Cryptocurrency’ being little more than buzz words to a lot of us, Jack Castonguay, our Director of Accounting & License Preparatory content, has answered some of our most commonly asked questions.

Get your crash course on what blockchain is and how it could impact your day to day role.

Who are you, and what do you do at Surgent?

My name is Jack Castonguay and I am the Director of Accounting & License Preparatory Content. I oversee the content for our various accounting exam products: CPA, CMA, EA, etc. Lately, I have been more focused on the impact of emerging technologies and data analytics on accounting. I have research exploring how the audits of public companies utilizing blockchain would be undertaken and how public companies must account for cryptocurrencies in their financial statements.

What’s one trend you expect to change the industry within the next five years and why?

The next five years are due to be pretty exciting. For the accounting industry. With the outsourcing and automation of routine audit, tax preparation, and financial reporting processes, we’re likely to see the nature of work done by accountants accelerate and change, particularly in the early stages of their careers.

Accountants will need to be more than just accountants.

They will need to be technologists, data analysts, and communication specialists. This will require them to be better prepared to apply critical thinking skills and perform more subjective tasks such as identifying and assessing risks and reviewing nonfinancial information. They must then be able to communicate those risks and information to clients.

This is happening because technology is allowing firms to do more of the work previously done by entry-level staff with less human capital. Accountants must adapt to the growth in technology and be ready to learn new analytical methods and tools to help them stand out from the crowd.

What’s your biggest piece of advice for candidates preparing to sit the CPA exam?

This can really be answered two ways.

1. For exam candidates that are still in school – try and pass as many parts as you can before starting your career. The last thing you will want to do after working a full day is to come home and study more. It gets more and more difficult to find time to study and prepare once work starts.

2. Generally, and for all candidates – break the exam down into manageable parts. Focus on one section or one part in that section at a time. That will keep you from getting overwhelmed and will also allow you to recognize accomplishments along the way.

What is blockchain?

The Center for Audit Quality defines blockchain as “a shared ledger of transactions that allows digital assets to be transferred across a decentralized network in real time and in a manner that cannot be changed.”

So, what that means is that it’s a distributed record for sharing digital assets (i.e. bitcoin – which is a digital currency) and information with the master file, which is maintained by all the parties on the blockchain as opposed to traditional databases managed by one or more select entities. If there is a vulnerability or one entity or the blockchain attempts to alter information on the blockchain without the approval of the other entities, the change won’t get approved and the records will remain unchanged. That helps it to be a much more secure ledger.

What is the immediate blockchain application, as of March 2020, to the accounting profession?

Presently the applications of blockchain are limited to auditing transactions for companies that are integrating financial reporting with their blockchain technologies and accounting for cryptocurrencies that are derived from blockchain.

Okay, so how has the accounting education changed, if at all, relating to blockchain/digital assets?

We are starting to see many colleges and universities offer elective courses in blockchain and integrate blockchain into traditional accounting classes. Some of these electives are more focused on use cases and practical applications and others are on how to code and design a blockchain.

In the core accounting courses the accounting for cryptocurrencies and other digital assets is discussed. Tax courses are covering how the use, purchase, and payment of cryptocurrencies is treated by the IRS and audit courses are discussing internal control considerations surrounding blockchain and what degree of audit evidence can be obtained from blockchains.

How do you expect blockchain to affect the accounting profession in the future?

In the immediate future most of the impact will be in internal controls testing of blockchains and the potentially higher quality audit evidence that can be obtained from them. However, for this to be more commonplace, the auditing standards will need to evolve and be updated to match the technology that is currently available. Many of the potential audit benefits of auditing transactions on the blockchain are constrained by auditing standards that were written prior to the growth of the technology.

So, how does blockchain impact the day-to-day job role of an accountant?

It shows the need for accountants to be in a state of constant learning. A decade ago, blockchains and cryptocurrencies were only relevant to a select group of individuals. Now, accountants at firms of all sizes are being asked about it. For accountants to stay relevant and valuable to their clients, they must always be learning. Today it’s blockchain. Tomorrow it will be something we haven’t even heard of. Yet, accountants must be ready to learn and apply their knowledge to the next new breakthrough.

Will the rise of blockchain impact any certifications? If so, how?

I’m going to take the copout answer and say it depends. Presently, neither blockchain nor cryptocurrencies have achieved widescale adoption so their impact on certifications is minimal. Certification exams are only asking basic questions on the exams (i.e., what is blockchain, how are cryptocurrencies treated for individual taxpayers, etc.), if any. Until more widespread adoption occurs, the certifications won’t, nor should they, expand to cover these topics.

Jack Castonguay, Ph.D., CPA, serves as the Director of Accounting & License Prepatory Content. He holds a BBA in Accounting and a Master of Science in Accounting from James Madison University and received his Ph.D. in Accounting from the University of Tennessee. Jack began his career in public accounting with a Big Four accounting firm auditing manufacturing and financial services clients. He has taught financial accounting and auditing at the graduate and undergraduate levels and is currently an assistant professor at Hofstra University.