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CRYPTO CURRENCY: Examining the role of cryptocurrency and its impact on practices within the accounting industry.
University of Leicester
The chosen topic for this assignment is the role of crypto currency and its impacts on practices within the accounting industry. Bit coin has been the most commonly known crypto currency because of its increase in popularity (Kokina, Mancha and Pachamanova 2017). With the usage of crypto currency, the users can exchange their values in a digital manner. This assignment would discuss regarding the impacts of using crypto currencies in the field of accounting. Accountancy can be described as fundamentally based around various transactions that are financial in nature (Higgins 2018). Hence any move that would be towards the usage of crypto currencies by individuals or business and governments is likely to have significant ramifications for that particular profession. Crypto currencies are growing to great extent since some years and most of the people have heard of the term bit coin, though most of them do not have any idea regarding the fact that how it actually operates. Besides bit coin there are numerous other digital currencies that are not well known like bit coin (Karajovic, Kim and Laskowski 2017). These currencies include Ethereum, Litecoin, Ripple and many more.
The usage of crypto currencies for the purpose of buying services or goods is still in the initial stages but it has been increasing in the form of an established form of payment. An example of this which can be considered include the usage of PwC which has already undergone its initial payment in bit coin and numerous more retailers that perform their operations online and some online retailers such as Expedia allows their customers to make payment in bit coins (Gordon 2018). Various businesses are presently in the state of research as well as development of adopting crypto currencies. A certified finical technical as well as market analyst along with a trading mentor. The standard bank has integrated he technology of block chain and they have carried out the initial crypto payment from an institutional bank (Kuhn 2018). They have also proceeded in the verge of launching a particular application for payment carried out in the form of crypto currencies. This would be done with the help of Ripple. The usage of crypto currencies has numerous impacts on the industry of accounting. These impacts have been mentioned in this assignment in a detailed manner.
Crypto currency has been used by various industries for numerous purposes. Similarly, the crypto currency has been proved to be useful for the industry of accounting hence this field has been using it for number of their operations (Moll and Yigitbasioglu 2019). After utilizing it for a span of time, it has been realized that the usage of crypto currency has impacted the industry of accounting in a negative way as well, besides providing numerous advantages. One of the obvious areas that contributed in adopting the usage of crypto currency is considered to be an incentive for various customers to buy or carry out any task. According to Ko, Lee and Ryu (2018), clients can be incentivized in order to participate in the process of answering various questionnaires, they are paid reward in return. These rewards were provided in the form of crypto currencies just after the participants have submitted their questionnaires or by having a client to receive crypto in the form of a premium for her or his participation to a particular activity for an entity. An example of this is allowing sharing a particular amount of data and much more information.
According to Dogru, Mody and Leonardi (2018), widespread usage of crypto currencies have the chances of implications for the accountants, in the services that they provide to their clients and the way they operate their business. From a perspective of financial reporting, states that the best advices that can be provided include ensuring the fact that they keep perfect records, so that they can comply with requirements of taxation. As per Gaither and Joanie Sompayrac (2018), at the time of purchase of crypto currencies, nothing could be expected at the particular point of sale. Tax is meant to be liable on the amount of profit that is earned when an individual sell something which has an increased value compared to before. This is known as capital gains tax. Overall tax-free allowance for the asset gained by an individual is around £11,700 for the year of 2018- 2019. In case the profit from selling the crypto currency addition with other asset gains is comparatively less than expected, the individual would need to report this and pay the tax on it. In case an individual sells up to four times the overall allowance of the crypto currency assets, and even if the individual makes a profit of less than £11,700, the individual must report this sale to the HMRC. Besides the treatment provide by accounting, accountants and advisors must also highlight the dangers that might come from the usage of crypto currencies. The lack of various regulations in the world of crypto currency, has resulted in significant rise in various criminals that use these digital monies in order to launder money and hence carry pit various criminal that are financial nature. As per Avdeychik and Capozzi (2018), accounting firms are responsible for ensuring the fact that the clients have engaged themselves in the transactions related to crypto currencies and have been a subject to enhance due to diligence measures. Screening against sanctions that are high in quality, people that are exposed in the aspects of political issues as well as adverse media have been minimum level of regularity. This is because of the diligence that should be implemented as well as accountants must be conducted added checks when the transactions are inappropriate in nature. In the long term, there have been potential for crypto currencies in order to help the fluctuations in managing the currencies. According to McKay and Peters (2018), any strategy to manage the fluctuations in management of crypto currency would need to come along with a warning. An example of this includes the US government to introduce various tariffs on the import of goods and here the threat of trade wars contributes in escalating various businesses that usually operates overseas; they might use the crypto currencies as a strategy for reducing their risks. Accountants should be ready in order to help the clients to explore the potential scenarios (Jayasuriya and Sims 2019). Giving services that are advisory in nature as well as being proactive with the planning as well as forecasting that has been made is very important for the profession of accounting. Crypto currencies might be a part of the conversation such that the accountants must be prepared. As per Cocco Tonelli and Marchesi, (2019), accountants must be benefitted from increased usage of the block chains, which is considered as the baseline of bit coin. With the usage of crypto currencies accountants would be allowed to download the entire set of transactional data from block chains, which contributes in simplifying their work. They also have algorithms that perform their work of accounting in the end.
Various research questions that have been set for this assignment are as follows
Methodologies can be termed as description of the methods that would be used in order to carry out the research. It can further be defined as a systematic plan that can be utilized for the purpose of conducting a research. Research methods are of two types, qualitative as well as quantitative. In order to carry out this particular research, qualitative methods would be utilized. Qualitative methods usually aim in complete as well as detailed description of various observations; it can also include various contexts of numerous events as well as circumstances (Omane-Adjepong, Alagidede and Akosah 2019). Research methodology can also be defined as a process that involves the collection of related data and information for the purpose if taking informed business decisions. The methodology might include referring to various publication researches, surveys, interviews as well as other research techniques. They can also include historical as well as present data (Meng and Qian 2018). The methodology would take about the logic that stands behind the method that has been used in the provided context of the study and hence providing a detailed explanation on why specific methods or techniques have been used. For this assignment, descriptive research design would be followed; this would describe the characteristics in a detailed manner (Khandelwal 2019). Longitudinal research study of information would be incorporated. With the help of this, the assignment aims in providing insights into a particular understanding of the detected research issue. For this assignment, the purpose of the study would be to use secondary data from various reports, papers as well as articles that have been published previously. These papers would help in proving insights in the research study.
From the literature review, it can be derived that bit coin consists of a distributed opinion when the future is concerned. There are numerous facts that proved to be against bit coin being prospect of a long run. The literature review also presents one of the greatest benefits of bit coin is that it is meant to stay private, untraceable and secured (Zhang 2018). This had provided a great benefit to the criminals on the web. Crypto currency has very bad reputation after the new had been received regarding the fact that bit coin is used in order to send money in an anonymous manner on the fraud websites. It had also been identified as the source of saving a huge amount of tax. For carrying out this assignment and investigate the benefits as well as challenges provided by bit coins in the industry of accounting, various external sources have been used (Ramrakhiani 2018). Primary data would also be collected in order to carry out the assignment. Various professionals belonging to the background of accountancy have been interviewed in order to receive primary data. They had been asked regarding the impacts of crypto currency in the field of accountancy and how is it affecting them (Taylor, Bunker and Johnson 2016). The responses had been stored and recorded for future use and for obtaining better results. Primary research method would help in getting real life examples and feedback on the topic without the interference of any third party.
The carrying out of research might result in numerous ethical issues; some ethical issues include interfering into the personal space of interviewees, recording responses without their consent, forcing them to take part in the research and many more (Raymaekers 2015). For this reason, the ethical considerations are to be prepared. Various ethical considerations that have been made in this assignment are as follows
Not harming the Beneficence: the ethical principle of the beneficence refers to the principle of the beneficence includes professional mandate to carry out effective as well as significant research in order to serve as well as promote the welfare of the constituents (Cai 2018). In the case of qualitative research that is being carried out in this assignment, it is very difficult to predict beneficence.
Respecting the anonymity as well as confidentiality: maintaining the anonymity as well as confidentiality is considered as one of the most important ethical consideration. This is because in numerous cases, the employees or participants of the primary research do not want their identities to be revealed. Hence this sort of ethical consideration helps in carrying out effective as well as appropriate research (Azarova, Moroz and Zhalin 2017). In this assignment, this ethical consideration has been considered as well. The participants, who have helped in carrying out the practical research, were kept anonymous. The research team had ensured their identity would not be disclosed and it would be kept anonymous until they want it to be disclosed. This data is kept anonymous in order to maintain a moral duty of protecting society.
Respect for privacy: this ethical consideration is also considered as an important one because the matter of privacy is considered to be an important aspect. The employees or participants who had been a part of this research would be asked regarding their responses and them their responses would be kept privately and must not be shared with any other participant or with any other external sources (Woodside, Augustine and Giberson 2017). The participants must be ensured that their responses or results would not be disclosed with any of the sources. For this purpose, the participants that were approached along with a form which mentioned that the data that would be provided by them is completely private.
Consent of the participants: this ethical consideration is also one of the most important because people who have participated in the research must provide their consent in order to continue their participation. For this particular purpose, a consent form is provided to the participants along with mentioning the terms and conditions involved in the research (Sapovadia 2015). The participants are told to sign the consent form in order to provide their consent with the research. This provides a proof on the fact that participants have agreed to participate in the research.
Harming personal emotions: while carrying out the research it has to be considered that none of the participants are asked questions that would harm their personal emotions. Their personal space is not supposed to be intervened. It is an ethical consideration that the participants are not asked any sort of personal questions that they feel uncomfortable to answer.
After carrying out the primary and secondary data, there are various findings that have been received. The impacts of using crypto currencies in the field of accounting have been derived from this research proposal (Taylor, Bunker and Johnson 2016). The findings include advantages as well as disadvantages provided by the usage of crypto currencies in the accounting industry. These findings have been mentioned below.
It can be concluded that crypto currencies have numerous impacts on the operations going on within the industry of accounting. Crypto currency has been described as an encrypted as well as peer-to-peer network which is utilized for the purpose of facilitating digital barter. This technology has been developed around eight years ago and it has become even more advanced since the time it was introduced. Bitcoin has been the most popular as well as the first crypto currency which is contributing in paving the way in the form of a disruptive technology to unchanged as well as long standing financial payment systems, these systems are being used by people for decades. While crypto currencies do not have the ability to replace the traditional currencies, they have the ability to change the way numerous global markets that are connected through internet interact with each other. They might contribute in cleaning the barriers that surround the normative national currencies as well as rates of exchange. Technology has been advanced at rapid rate and the overall success of the provided technology is solely dictated by the market on which it tends to improve.
Crypto currencies have the ability to revolutionize trade markets that are digital in nature, this is done with the help of creating trading systems that are free flowing in nature; this is done without any fees. Bit coin has been described as the world’s most common as well as popular crypto currency. It has increased the popularity by advancing even more since the time it has been introduced. It has basic structures as it had done when it had created in the year of 2008. Crypto currencies work on the theory of solving various encrypting algorithms in order to create various unique hashes that have been finite in number. This assignment discusses regarding various ways by which the crypto currencies have impacted the industry of accounting.
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