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IEEE Transaction on Internet of Things,Year:2019

Date of publication xxxx 00, 0000, date of current version xxxx 00, 0000.
Digital Object Identifier 10.1109/ACCESS.2017.Doi Number

Application of Internet of Things and

Blockchain Technologies to Improve
Accounting Information Quality
# #
Jiapeng Wu , Feng Xiong , Cheng Li*
School of Management, Xiamen University, Xiamen 361005, Fujian
#
These two authors make equal contribution to this article.
*Corresponding author: Cheng Li (e-mail: [email protected]).
This work was supported in part by the National Natural Science Foundation of China under Grant NSFC-71772156, Grant 71790602,
Grant 71802085, in part by the Chinese Ministry of Education under Grant 18YJC630211, and in part by the China Post-Doctoral
Research Fund under Grant 2018M632586.

ABSTRACT Following the rapid development and maturity of Blockchain (BC) and Internet of Things
(IoT) technologies, this study proposes two applications of a BC-IoT transaction model in the accounting
field. The BC-IoT transaction model is capable of automatically collecting, uploading and recording all
relevant data in the enterprise transaction process under the premise of satisfying certain assumptions. This
model does not require manual intervention at any point in the process; no data recorded on the distributed
ledgers can be tampered with or revoked. The data collected using this model can be used as information on
events, providing data support for the events approach to basic accounting theory. This practice responds to
the important insight of Sorter, who proposes the provision of accounting information in real time and on
demand to substantially improve the usefulness of accounting information. This study also identifies that
BC technology can significantly improve the relevance, faithful representation, timeliness, comparability,
and other aspects of accounting information quality.

INDEX TERMS accounting information quality, blockchain, events approach to basic accounting theory,
internet of things, smart contract

I. TECHNICAL CHARACTERISTICS OF THE IoT AND global dynamic network facility with self-configuring
BC AND THEIR APPLICATIONS IN THE BUSINESS capabilities that is based on standard and interoperable
WORLD
communication protocols. In this network, all substantial and
virtual items have specific coding and physical features that
A. INTERNET OF THINGS (IoT)
can be seamlessly linked through smart interfaces to achieve
The concept of the IoT was originally derived from the
the sharing of information [3].
Radio Frequency Identification (RFID) system, proposed
In brief, the IoT is the interconnection between physical
by the Automated Identification Center (AutoID Labs)
objects and the digital world [4]. From a vertical perspective,
established by the Massachusetts Institute of Technology
the IoT system can be divided into three layers: the sensing
(MIT) in 1999. Based on the linkage between RFID
layer, the network (or transmission) layer and the application
information from different items obtained via RFID sensing
layer [5]. As illustrated in Figure 1, the IoT's application
devices and the Internet, RFID is able to achieve intelligent
layer has highly personalized features, in which the
identification and management.
development of blockchain (BC) technology can provide a
At the 2005 World Summit on the Information Society
reliable platform for the IoT's application layer.
(WSIS) held in Tunis, the International Telecommunication
The IoT, robo-advising, and BC are some of the most
Union (ITU) published the “ITU Internet Reports 2005 – the
valuable innovation types [6]. In the recent development of
Internet of Things”, which introduced the IoT‟s features,
the IoT, deep learning appears to be a valid approach to
relevant technologies, challenges and future opportunities [2].
extracting accurate raw sensor data from IoT devices, as
The IoT is an integrated part of the future network; it is a

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 This article has been accepted for publication in a future issue of this journal, but has not been fully edited. Content may change prior to final publication. Citation information: DOI
10.1109/ACCESS.2019.2930637, IEEE Access
IEEE
AuthorTransaction on Internet
Name: Preparation of Papersof
forThings,Year:2019
IEEE Access (February 2017)

Technology support: big Function: Apply to different

Application layer data, cloud computing, aspects of social life, such as
blockchain etc. transportation and electric guild.

Function: transmit the

information collected from the
sensing layer to the data
Network layer Technology support: 5G
processing centre, with the help
of highly efficient network
transmission
Function: collect item
Technology support:
information in real time,
Sensing layer RFID, GPS sensor, bar
including the item position,
code, QR code etc.
characteristics, status etc.

FIGURE 1. Different layers of the Internet of things.

deployed in complex environments. Using edge computing, the previous block as an important part of its label, and such
Li et al. [7] designed a novel offloading strategy to optimize process is iterated. Each block is marked with a timestamp
the performance of IoT deep learning applications. IoT that indicates the creation time while confirming the
technology can be used in different industry sectors, such as existence of the transaction data. From the genesis block to
industrial IoT, smart energy, smart homes, smart cities, the most recent block, all blocks are linked in a long chain
health care, social care, sports and well-being [8]. However, based on the timestamp order. All historical data are stored in
there are still obvious challenges for its further development: the BC with timestamps as their labels.
i) specific IoT solutions are likely to be only a small part of The transaction data recorded in each block represent all
an overall solution, ii) it is not always clear how an IoT the value exchange activities that occurred after the
solution can contribute to overall services, iii) IoT solutions formation of the previous block and before the creation of the
can be fragmented and difficult to scale, iv) actors experience current block, and all the blocks aggregate to form a record
distrust and hesitation around sharing data and platforms and set [9]. The recorded data include asset transaction records,
finally, v) enterprises hesitate to change their business model. asset issuance records, clearing records, smart contract
The IoT acquires sensory data from the physical world records, and even IoT data records. For example, the bitcoin
through a sensing device, establishing a correspondence BC system records all loan transaction data in full based on
linkage. Before the appearance and application of BC, „double-entry bookkeeping‟, including the bitcoin deposit
security and privacy concerns have stopped large-scale and withdrawal amounts, transaction amounts, and the
development and further applications for the IoT. Such addresses of payers and receivers. These data are encrypted
concerns include how to ensure that data come from real and to form the block‟s hash value, and this block is further
reliable sensing devices, are not tampered with when they are labelled with a timestamp. In general, recorded data are
transferred between different application systems, and are not organized into a Merkle tree structure in the storage process.
illegally accessed and stolen. BC technology can help solve The hash value of a block is, in fact, the hash value of the
the security and privacy issues around IoT data on the one root node of the data record tree, which is calculated in
hand, and intelligent contract scripts based on BC, on the stepwise fashion using the hash algorithm following a
other hand, can give the IoT socialization attributes. The bottom-to-top approach based on the data record tree. If
integration of the two helps to achieve interaction between stored data at the bottom-most level are tampered with or
different subjects and establish a new business transaction deleted, the hash values of the top layers will be altered,
model. which then recursively results in the change of the block‟s
root hash value, which is also a component of the next block.
B. BC TECHNOLOGY Such characteristics of recorded data increase the likelihood
BC connects blocks of transaction records in the order of of discovering the origin of any data tampering in a BC
timestamps on a chain (including data), the hash value of the system. The first appearance of BC technology was bitcoin, a
block, and the hash value of the previous block, which are digital currency developed by Satoshi Nakamoto, who
arranged in chronological order to record all transaction established the principles and construction of bitcoin [10].
activities that occur in a process. The header and the body of Bitcoin establishes a globally distributed ledger system,
the block together form a block structure (Figure 2). The termed „blockchain‟ by Nakamoto, in which deception is
header of the newly formed block contains the hash value of impossible.

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 This article has been accepted for publication in a future issue of this journal, but has not been fully edited. Content may change prior to final publication. Citation information: DOI
10.1109/ACCESS.2019.2930637, IEEE Access
IEEE
Author Name: Transaction
IEEE
Preparation Transaction
onfor
of Papers Internet
IEEE onofInternet
AccessThings,Year:2019
of Things,Year:2019
(February 2017)

FIGURE 2. A typical blockchain structure.

Following the initial research into BC for digital currency developed by Scoca et al. [17]. This methodology analyses
such as bitcoin [11], other different applications for BC have the cost and the necessary changes to reach an agreement. In
been, such as cross-border remittances, smart contracts, addition, Zhang et al. [18] propose a smart contract-based
automated bank books and digital assets, that can framework that consists of multiple access control contracts
revolutionize the current banking system [12], as well as (ACCs), one judge contract (JC) and one register contract
securities trading, supply chain management, voting and (RC). Better distributed and trustworthy access control for
digital ticket trading platforms [13]. Swan [14] envisioned IoT systems can be achieved based on this framework.
the application of BC in three phases: (1) BC 1.0 involves However, it is also important to recognize the challenges of
digital currency such as bitcoin; (2) BC 2.0 introduces the smart contract application. Based on the experience of
smart contract to BC to realize a programmable economy, teaching an undergraduate course on smart contract
which is represented by Ethereum; (3) BC 3.0 is represented programming at the University of Maryland, Delmolino et al.
as the decentralized autonomous organization (DAO), [19] identify a few mistakes in designing safe and secure
decentralized autonomous corporation (DAC) and smart contracts as practised by students; In addition, they
decentralized autonomous society (DAS). also suggest ways to fix/avoid them, and some of the best
The concept of a smart contract, one application of BC, practices for programming smart contracts [19].
addresses the issue of recording contract events. It is a
computer protocol with executable contract terms [15]. A II. ‘EVENTS’ APPROACH TO BASIC ACCOUNTING
smart contract is digitalised with the functions of contract THEORY (EABAT)
reading, rule verification, and contract execution. This In 1969, Sorter [1] proposed the „Events‟ Approach to Basic
concept of a smart contract stagnated due to the lack of a Accounting Theory (EABAT) to address the defects of the
corresponding platform to execute the contract. However, BC, traditional accounting model. He argued that this approach
the underlying technology of smart contracts, was developed would provide more raw data (i.e., information about
and is able to protect the contract terms from leakage or economic events) for information users and could thus meet
tampering before the execution of the smart contract. the individual needs of various accounting information users.
Therefore, smart contracts can be truthfully and completely Following Sorter‟s viewpoint, accounting scholars have
recorded in BC in real time. advanced basic theoretical research on EABAT [20]–[24]
Recently, the applications of smart contracts and and gradually established its theoretical foundation. Focusing
corresponding improvements have developed significantly. on the information system of EABAT, the question of how to
For example, based on smart contract technology, a use information technology to improve financial reporting
systematic framework to aggregate online identity and and its relevance has made some progress, e.g., the database
reputation information to achieve a holistic approach to reporting model [25], [26]; the resources, events, agents
personal online behavioural ratings has been developed [16]. (REA) reporting model [27], [28]; the large-scale on-demand
To improve the performance/efficiency of smart contracts reporting model [29]; the extensible business reporting
and IoT technologies, a formal language to specify language (XBRL) [30]–[32] and the multi-layer interface
interactions between offers and requests and a methodology financial reporting model [33].
for the autonomous negotiation of smart contracts were

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 This article has been accepted for publication in a future issue of this journal, but has not been fully edited. Content may change prior to final publication. Citation information: DOI
10.1109/ACCESS.2019.2930637, IEEE Access
IEEE Transaction
Author Name: Preparation onIEEE
of Papers for Internet of (February
Access Things,Year:2019
2017)

However, limited by the slow pace of development of the requirements of various information users, thereby
data-processing technology, EABAT has not been improving audit quality.
substantially studied and developed to the same extent as the The above literature reveals how BC may influence
value approach to the basic theory of accounting. Although professional accounting practices, such as through the
information technology (including data-processing improvement of corporate governance and audit quality,
techniques) has experienced significant developments in the indicating that accounting information quality can be
past decade, research on accounting information systems enhanced by BC technology. However, their discussions are
based on EABAT is still limited, especially that addressing only based on the existing frameworks of accounting models
the self-formation process of accounting information [34]. and theories in the spectrum of value accounting and
The recent development of BC technology has exposed some overlook the context of the EABAT. In addition, while
opportunities for EABAT research. current BC technology is able to protect chain information
security, few papers study how to make sure the external data
III. JUSTIFICATION OF BC AND IoT TECHNOLOGIES IN sources of the BC are also reliable. IoT technology responds
ACCOUNTING RESEARCH (EABAT) to the need for information source reliability in the EABAT
Recent developments in BC research have appeared in the approach.
field of accounting study. For example, Dai and Vasarhelyi This study discusses three key topics: 1) applications of
[35] investigated how to establish a real-time, reliable and BC and IoT technologies in the EABAT, 2) construction of a
transparent accounting system with BC technology. This simple transaction model and its accounting and reporting
accounting system is capable of providing to users the mode in a BC and IoT environment supporting the EABAT,
reliable storage of accounting information with real-time and and 3) discussion of how BC technology may affect
low-cost operations and of using smart contracts to ensure accounting information quality.
the compliance of accounting information processing. Dai
and Vasarhelyi [35] also constructed a „triple-entry‟ A. AN EXAMPLE OF A SIMPLE BC-IoT TRADING MODEL
bookkeeping approach based on BC technology, using a The traditional transaction models and approaches of
distributed ledger based on BC technology as an independent financial information gatherings lead to the „separation of
and reliable third-party intermediary to verify and record all business practice and financial information‟ and „information
transactions. Such a journal recording approach can generate isolation‟, which inevitably reduces the relevance of
transparent, secure and self-verifying accounting information accounting information. Based on BC technology, we
that can be shared with other nodes (organizations) in a established a simple „BC-IoT‟ transaction model. This
timely manner. transaction model is capable of the automatic identification
Dai and Vasarhelyi [35] discuss the application of BC in of as well as the transmission and recording of massive
the accounting field based on the theory of value accounting; amounts of data. It requires no manual intervention. Because
this differs from the current study, which discusses this topic all data are recorded in distributed ledgers, tampering or
based on the EABAT. In addition, Dai and Vasarhelyi [35] revoking is not possible. Current traditional accounting
focus on the reliability issue of chain data, following the practices are based on countless paper documents as
adoption of BC as a third-party accounting approach that will information sources; manual processing is required to input
not change the existing accounting process, while the current data into the accounting information system. This manual
study explores the restructuring of the current business model processing practice is time consuming, costly, and, most
and re-creates the accounting process. Finally, while Dai and importantly error prone. With the help of IoT technology
Vasarhelyi‟s [35] discussion solves the chain data reliability (such as RFID), it is becoming possible to achieve the real-
issue, this study introduces the IoT layering theory to address time transmission and updating of inventory information,
the reliability issue in transmitting off-chain data onto the thus improving the efficiency and quality of data acquisition.
chain. As recorded in Figure 1, the proposed transaction model has
Taking a broader business perspective, Yermack [9] argued three sub-systems: smart contracts (contract system), the IoT
that BC technology would have a profound impact on (logistic system), and tokens (monetary system). It adopts the
corporate governance, including the real-time updating and following assumptions: smart contracts (contract system), the
recording of shareholder status, improving the accuracy and IoT (logistic system), and tokens (monetary system). It
reliability of company elections , increasing the liquidity of adopts the following assumptions: first, this model is limited
equity transactions, and effectively suppressing or mitigating to sales and procurement in the manufacturing industry; the
agency problems, such as corporate earnings management, inventory under discussion includes raw materials, work-in-
insider trading and related party transactions. Rozario and process products, and finished products, all of which are
Vasarhelyi [36] believe that smart contracts based on BC can physical commodities to which IoT technology is applicable;
replace auditors by conducting audit procedures automatically second, this trading model disregards/neglects transportation
and provide real-time and transparent audit reports that meet and taxation (costs); third, the commodity transaction uses
tokens to realize the debit-credit system.

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 This article has been accepted for publication in a future issue of this journal, but has not been fully edited. Content may change prior to final publication. Citation information: DOI
10.1109/ACCESS.2019.2930637, IEEE Access
IEEE
Author Name: Transaction
Preparation onforInternet
of Papers of Things,Year:2019
IEEE Access (February 2017)

FIGURE 3. The BC-IoT trading circulatory system.

1) THE SMART CONTRACT (CONTRACT SYSTEM) transactions that can be completed) is created and
In this model (as shown in Figure 3), the contract is successfully executed. This new contract is denoted as
regarded as the starting point of a transaction and directly „Smart Contract 2‟ in this model.
links logistic flow, capital flow, and information flow. If 2) THE IoT (LOGISTICS SYSTEM)
there is no contract, then there is no transaction. When there A logistics system based on IoT technology contributes to the
is a transaction, there is always a contract. A contract can key technical foundation of this trading model. A mature and
provide a large amount of useful information. Therefore, stable IoT system assists in the smooth implementation of a
the EABAT should be treating contracts, orders and similar smart contract system. The IoT serves as a data collector and
entities as important events. In the proposed „BC-IoT‟ recorder immune to mistakes and fraud, which ensures the
transaction model, all transaction contracts are implemented faithful and prompt upload of inventory information to the
through smart contracts, including those that are BC. Under this logistics system setting, goods become smart
successfully (partially; failed to; and not yet) executed. This items that can be located in real time with scene information.
corresponds to three situations: first, when the contract fails They are more than physical objects in the logistic process:
to be executed due to reasons such as contract cancellation, they are also resources that can be utilized to form a smart
the contract is invalidated, and the transaction is cancelled. automated execution system with real-time information
However, the contract information is still recorded, stored acquisition and processing. In this model, the warehouse
in the block, and marked as „Smart Contract 1‟. Second, if control systems, the access control systems, and the GPSs as
the contract is fully executed, the logistics and cash flow implemented by Companies A and B will be able to monitor,
steps are also executed. For example, according to a smart record and upload the goods‟ status in real time. By reading,
contract term, Company A should transfer goods from the analysing and judging the uploaded data, the smart contract
warehouse that belongs to Company A to the warehouse can decide whether to execute the contract.
that belongs to Company B before December 31st. When 3) TOKEN (CAPITAL FLOW SYSTEM)
the access control system and warehousing system in the The token used in this system is similar to a proof-of-
warehouse of Company B confirm that they have received receiving entitlement (money) similar to a cheque. The token
the batch of goods, the ownership of the goods is is used for transaction settlement and helps the regulatory
transferred from Company A to Company B. Ownership authority perform fund monitoring for the entire cycle. First,
transfer is the criteria required for contract execution, token the use of token settlement can solve the problems stemming
payment, and recognition of sales revenue. Third, the from recognizing sales revenue based on sales invoices and
contract is partially executed. In this case, not all the like. In this proposed „BC-IoT‟ transaction model, sales
transactions are completed, which means that the old invoices are no longer required. For example, when goods
contract is invalidated, and a new contract (including all arrive at warehouse B, the sensing layer of the IoT can

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Author Name:
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of Things,Year:2019

instantly inform the smart contract, the token will be C. CONSTRUCTION OF A FINANCIAL REPORTING
compulsorily transferred to Address A, and the sales revenue SYSTEM BASED ON THE BC-IoT MODEL
will be simultaneously recognized . Second, the token can be Using the EABAT as the theoretical foundation and the
used to manage accounts receivable. When the credit distributed ledger as a platform, a restructuring of the current
transaction method is adopted, the smart contract can record financial report produces a new type of distributed financial
all information of the credit transaction, such as the report that is interactive, real time, and demand driven.
transaction time, goods quantity, pre-arranged time for Regarding the contents it covers, its new format exceeds the
paying the token, etc., onto the distributed ledgers and then scope of reporting items as reported in the current value-based
form an account receivable item. The smart contract will financial report, as it further incorporates reporting items such
automatically execute the program at the agreed-upon time as smart contracts and product sales details. Depending on the
and then transfer the token from the buyer to the seller. Third, level of trade secrets, it can also set access restriction for the
the use of tokens allows users to monitor the flow of funds associated reporting items. This new format for the financial
within the company during the entire process. Thus, financial statement allows the report maker to add and/or delete items
fraud is minimized. from the existing/old-style financial report and then release
the old-style financial reports for reference. Such a financial
B. CONSTRUCTION OF AN ACCOUNTING reporting model design is presented in Table I, embedded
INFORMATION SYSTEM BASED ON THE BC-IoT MODEL with the following characteristics.
The EABAT argues that events are economic activities
related to an accounting entity; examples include but are not TABLE I
NEW FORMAT FOR THE BALANCE SHEET
limited to leasing, promising, and placing. “Inventory, thus,
Assets Liabilities
does not report either value or costs but rather describes the Token
acquisition and consumption activities that have occurred” Accounts
[1]. Qi [37] argued that economic events are the smallest unit Receivable
of accounting information and a boundary of the accounting Raw Materials
information system. All economic activities that match such Inventory Work-in- Owners‟ Equity
definitions should be faithfully recorded and collected when process
such business transactions occur. EABAT only records the Finished goods
original economic events and deletes the user-related Others: Smart Contract 1; Smart Contract 2; Smart Contract
accounting procedures, such as adjustment, estimation, 3.
amortization, and summarization, which allows users to
retrieve needed information and substantially improves 1) REAL TIME
information relevance. The existing accounting mode relies on the manual entry of
This study proposes an accounting information system accounting information, which cannot satisfy the requirement
(AIS) as presented in Figure 4. It follows the EABAT system for timely recorded information in the EABAT system. In
design suggested by Qi [37]: economic event→accounting contrast, IoT technology can sense event occurrence in real
event→accounting report. In the previous example involving time and the real-time status of actual products (such as
Companies A and B, as illustrated in Figure 3, for Company inventory). This allows IoT technology to transmit such
A, the economic event is „Smart Contract 1‟, goods information to data-processing systems, such as distributed
(inventory) decrease, tokens increase. „Smart Contract 1‟ ledgers, to achieve real-time information sharing. Therefore,
includes the content and execution result of a smart contract. the values of the reported items in the financial reports based
Information related to the decrease in goods (inventory) as on BC will be updated in real time. Although it is no longer a
recorded in the block includes the name, quantity, cost, periodic financial report, it can still be used for the purpose
location and date the goods were shipped, and information of comparing corporate performance.
about the token increase includes the address, date, and
2) TRACEABLE AND IRREVERSIBLE DATA
notifications (e.g., revenue from the sales of a certain item).
Each figure in the financial report comes with a hyperlink,
These records correspond to accounting events in terms of
which can be used to trace the original source and evaluation
asset items, which are the reduction in goods (raw materials,
(pricing) model in use. In addition, a key feature of a
work-in-process products, finished products) and the increase
distributed ledger is irreversibility. In the case of the
in tokens. However, the valuation of goods, e.g., the lowering
subsequent adjustment or revision of accounting information,
of historic cost or net realizable value method, belongs to the
such changes must be recorded on the chain and a new block
category of accounting policy choice, which is determined by
is then generated. Such action stores the original accounting
the information user. Based on the above information, a
information and the newly modified accounting information
financial report is ultimately generated.
together on the chain, which improves accounting
information transparency.

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 This article has been accepted for publication in a future issue of this journal, but has not been fully edited. Content may change prior to final publication. Citation information: DOI
10.1109/ACCESS.2019.2930637, IEEE Access
Author Name: Preparation of Papers for
IEEE Transaction onIEEE Access
Internet of (February 2017)
Things,Year:2019

FIGURE 4. An example of an Accounting Information System (AIS) based on the BC-IoT model.

3) DIVERSIFIED CALCULATION ATTRIBUTES recognized „comprehensiveness‟, „relevance‟, „reliability‟

The new financial report provides not only the value data of and „comparability‟ as the primary quality characteristics of
monetary measurement but also data for other measurement accounting information [39]. In 2010, the FASB and the
attributes, such as the size, weight, and quantity of inventory. International Accounting Standard Board (IASB) together
This is because the sensing layer of the IoT can sense the proposed new financial information quality characteristics,
external world and collect various types of information, such which newly included „relevance‟, „importance‟ and „faithful
as physical measurements (e.g., length, width, height, weight, representation‟ [40]. This discussion of accounting
and volume), identity, location, and audio and video data. information characteristics indicates that „reliability‟ and
„relevance‟ should be considered to be fundamental.
4) A PERSONALIZED DECISION-MAKING MODEL
This model is used to transfer the choice of accounting According to the Statement of Financial Accounting
evaluation model to the users of financial reports so that Concepts (SFAC) No. 2 Qualitative Characteristics of
users can insert relevant values and perform accounting Accounting Information [38], the definition of „relevance‟
estimations based on their own judgement. Corporate should include three dimensions: predicted value, feedback
accounting professionals can still provide tradition financial value, and timeliness. According to the ISAB/FASB‟s
reports for reference. Qualitative Characteristics of Useful Financial Information
[40], „relevance‟ requires that financial information enable
5) COMPREHENSIVE AND SAFE REPORTING
users to make different decisions. It includes the connotations
The financial report includes both accounting and economic of „predicted value‟, „confirmed value‟, and „importance‟.
matters that need to be recorded, such as smart contracts. As According to SFAC No. 2, „reliability‟ refers to the
the underlying technology of smart contracts, BC is able to requirement for an accurate accounting process and truthful
protect contract terms from leaking or being tampered with accounting and auditing results, including “neutrality, faithful
before the execution of the smart contract. Therefore, smart representation, and verifiability”. According to IASB/FASB
contracts can be truthfully and completely recorded in BC in [40], „faithful representation‟ includes completeness,
real time. neutrality, and error-free statements. In this study, we use
accounting information quality characteristics as criteria to
IV. THE IMPACT OF THE IoT AND BC ON ACCOUNTING
INFORMATION QUALITY discuss the impact of the IoT and BC technologies on the
In 1980, the Financial Accounting Standards Board (FASB) relevance, faithful representation, timeliness, comparability,
[38] first stated that the primary quality characteristics of verifiability, and the cost-benefit principle of accounting
accounting information are „relevance‟ and „reliability‟. In information (Table II).
1989, the Inter-Agency Standing Committee (IASC)

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 This article has been accepted for publication in a future issue of this journal, but has not been fully edited. Content may change prior to final publication. Citation information: DOI
10.1109/ACCESS.2019.2930637, IEEE Access
Author Name: Preparation
IEEE of Papers
Transaction onforInternet
IEEE Access (February 2017)
of Things,Year:2019

TABLE II
EFFECT OF BC TECHNOLOGY ON ACCOUNTING INFORMATION QUALITY CHARACTERISTICS
Quality Overall
Connotation Influence Mode
Characteristics Impact
Relevance Predictive value The BC accounting system is a real-time accounting system
Basic quality characteristics

that improves the timeliness of accounting information. It is

Confirmed √√ also an events approach accounting system that can provide
value accounting information on demand.
Importance
Faithful Completeness Distributed ledgers are irreversible and cannot be tampered
representation with; consensus mechanisms and smart contracts are naturally
√√ neutral; by improving the corporate governance level and
internally controlling quality, BC improves the truthfulness of
financial information.
Timeliness Not Applicable. Distributed ledgers achieve the real-time sharing of accounting
√√√
information.
Quality improvement

Comparability Not Applicable. Smart contracts help the company understand and consistently
characteristics

√√
implement accounting standards.
Comprehensibility Not Applicable. √ Not applicable.
Verifiability Not Applicable. Smart contracts enable self-verification according to
√
accounting standards, etc.
Cost and benefit Not Applicable. √√ Not applicable.
principle

goods, such as the service industry, remains a challenge;

V. SUMMARY second, because a token is a pass card instead of legal tender,
IoT and BC technologies could significantly change the the use and redemption of token systems in the setting of
existing accounting information systems, through the large-volume credit transactions remains a significant issue;
provision of transparent, credible, real-time accounting third, the application of BC technology is limited to certain
information. They can improve accounting information aspects, such as accounting information verification, and
quality and ultimately realize the EABAT vision. In this accounting procedures such as forecasting and valuation still
study, we first constructed a simplified BC-IoT transaction require managerial judgement via credit and auditing
model that includes three sub-systems: a contract system, a assurances; and fourth, since BC requires and records
logistics system, and a capital flow system. Based on this extensive information that may contain trade secrets, the
simplified BC-IoT transaction model, we further develop an information safety of sensitive accounting information
accounting information system that is able to produce remains a substantial challenge. All these challenges are
personalized financial reports based on the EABAT excellent directions for future research on BC/IoT
approach. This newly developed AIS model is capable of applications in accounting practice.
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 This article has been accepted for publication in a future issue of this journal, but has not been fully edited. Content may change prior to final publication. Citation information: DOI
10.1109/ACCESS.2019.2930637, IEEE Access
IEEE
Author Name: Transaction
Preparation onfor
of Papers Internet of Things,Year:2019
IEEE Access (February 2017)

J. WU received a Ph.D. in C. LI received a BA degree in

Business Management Business (Accounting) from
(Accounting) from Renmin Dongbei University Finance
University of China, Beijing, and Economics, Dalian, China,
China, in 2016. Since in 2002, and a Ph.D. degree in
December 2016, Dr Jiapeng Economics (Taxation) from
Wu has been a Post-Doctoral Xiamen University, Xiamen,
Candidate in the Business China, in 2007. From 2007 to
Management station of 2010, he was an Assistant
Xiamen University. His Professor with the Accounting
research interests include Department in Xiamen
Accounting Theory, University, Xiamen, China.
Accounting Information From 2010 to 2016, he served
System, and Blockchain. as an Associate Professor in
the same faculty. From 2013
to 2014, he was a visiting
scholar at Columbia Business
School, New York, United
States of America. Since 2016,
he has been a Professor with
the Accounting Department in
Xiamen University, Xiamen, China. His research interests include
financial accounting theory, taxation accounting, taxation planning, and
F. XIONG was born in corporate governance.
Guangzhou, China in 1988.
He received the Bachelor of
Commerce degree in
Accounting and Finance
from the University of
Queensland, Australia, in
2010 and an Honours degree
and Ph.D. degree in Dr. Cheng Li is a recipient of the Chinese National Accounting Leader
Accounting from the designation (Academic 5th Batch) and a board member of Chinese
Queensland University of International Taxation Research Association. He has published numerous
Technology, Australia, in papers in leading academic journals such as Quantitative Economics and
2013 and 2017, respectively. Technology Economics, Accounting Research, and Financial Research. He
has been principal investigator for several different research projects,
including the current national nature science fund project, “Tax Policy
Uncertainty, Corporate Taxation Risk Control, and Selection of Taxation
Strategy” (2018-2021).

From 2016 to 2018, he was a

post-doctoral candidate with the Business Management Station in the
School of Management, Xiamen University. Since 2019, he has been an
Assistant Professor at the School of Management, Xiamen University,
China. His research interests include technology adoption, social media,
corporate disclosure and stock markets. His articles have been published in
international journals and at conferences such as Technology Analysis and
Strategic Management, Business Horizons, the Journal of Developing
Areas, FMCG and AFAANZ conferences.

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