Two technologies are changing the ledger itself. Blockchain records transactions in a shared, tamper-resistant chain that every participant can check. Artificial intelligence does the routine work of accounting and spots patterns that people miss. At the same time, more accountants and staff work from home, which brings its own risks of fraud and cyber attack.
This topic covers all three: blockchain, artificial intelligence (AI) and the fraud risks of remote working, with the measures that reduce them.
It is the last of three topics on computerised and virtual accounting, after digitisation, data structures and virtual accounting. These are new syllabus items, so the exam is likely to ask you to define, explain benefits and risks, and recommend controls. The aim is to give clear definitions, a simple example of each idea and a ready list of points.
In 30 seconds
A Blockchain is a distributed ledger of time-stamped blocks, each linked to the one before. A transaction is verified by a majority of peer-to-peer nodes before a new block is added, so recorded data cannot easily be changed. Benefits to accounting include automatic verification of data, lower audit cost, proof of file integrity through a Hash, Smart contracts, fewer errors and frauds, and a traceable audit trail.
AI automates data entry, reconciliation and invoice processing, analyses data in real time, detects fraud such as duplicate payments, helps audit and compliance, forecasts, reads contracts (NLP) and answers routine queries (chatbots). Remote working raises fraud risk through weak supervision, weak home networks, unlimited access, public Wi-Fi and poor monitoring. The Fraud triangle is pressure, opportunity and rationalisation.
Controls include company-issued secured devices, access restrictions, training, a VPN, time-out settings and authorisation trails.
Blockchain technology
After accounting moved from manual to computerised systems, blockchain became the next disruption. A blockchain is a chain of blocks that contain information. It is an open, distributed ledger, and once data is recorded it cannot easily be changed or tampered with.
In accounting it can be described as an open, distributed database or public ledger that records transactions or digital events between two parties efficiently, and in a verifiable and permanent way.
Origin. In 1991 Haber and Stornetta proposed a cryptographically secured chain of blocks with time stamps, so that nobody could back-date or forward-date a document, without a third party keeping the records. The idea became widely known when Satoshi Nakamoto used a blockchain as the public transaction ledger for Bitcoin. It is now used in many sectors.
How it works. There are peer-to-peer nodes. When a transaction is requested, it is sent to the nodes, which verify it with an algorithm. If most nodes verify it, a new time-stamped block is created and added to the chain of earlier verified blocks, completing the transaction and updating the ledger. Each block holds a link to the previous block, so changing one block would break every later block.
Benefits in accounting:
- Standardised data lets auditors verify much of the data behind the financial statements automatically.
- The cost and time of an audit fall, so auditors can focus on complex transactions and internal controls.
- The integrity of electronic files can be proved: a Hash is a digital fingerprint of a file. It is written into the blockchain with a time stamp, and later the file is hashed again and compared. If the two match, the file is unchanged.
- Smart contracts are programs that run when conditions are met, such as an invoice that pays itself after the goods are confirmed as received to specification and the bank balance is sufficient.
- Manual recording and verification are reduced, and transactions can be written directly into a joint register, creating an interlocking record.
- Frauds and errors fall, because entries are distributed and sealed, so falsifying or destroying them to hide activity is practically impossible.
- It gives a traceable audit trail and can automate audit and authentication.
Conclusion. The record could be seen by auditors and regulators at the same time. The accountant’s role may move from record keeper to interpreter of the statements and facilitator of decisions.
Artificial intelligence in accounting
Artificial intelligence is the simulation of human intelligence in machines that are programmed to think, learn and adapt. In accounting it lets systems do tasks that normally need judgement, such as data analysis, classification and forecasting.
| Activity | What AI does |
|---|---|
| Automation of routine tasks | Data entry and reconciliation, invoice processing, bank and credit card matching |
| Real-time analysis | Finds trends and anomalies, gives insights for planning, produces live dashboards and reports |
| Fraud detection and risk management | Uses pattern recognition and predictive analytics to find duplicate payments, suspicious transactions and unauthorised access |
| Audit and compliance | Analyses large volumes of data, identifies high-risk transactions and checks compliance with regulations |
| Predictive forecasting | Forecasts cash flow, revenue and expenses from past data, machine learning and market trends |
| Natural language processing (NLP) | Interprets and summarises financial statements, extracts information from contracts and invoices, helps write reports |
| Virtual assistants and chatbots | Answer routine queries about balances, tax deadlines or invoice status |
AI moves accounting from a transaction function to a strategic partner. Accountants spend less time on routine work and more on advising, planning and decision support, but need digital skills to remain relevant.
Fraud risks of remote working
Remote working lowers fixed overheads and is likely to continue, but it brings risks of money and data losses from cyber attacks, internal fraud, weak controls and inefficient workflows.
Vulnerabilities. Remote staff may use unprotected public Wi-Fi, personal computers, and transfer files between work and personal devices. Without information technology (IT) staff to apply security patches, they are exposed. People who click on unknown links may give criminals usernames, passwords and corporate data.
Opportunities for fraud:
- Lack of supervision, which allows data theft, time theft, payroll fraud and workers’ compensation fraud.
- Cyber security risks, because home networks may use weak protocols and default passwords.
- Unsupervised and unlimited access to systems and information, beyond what the job needs.
- Exposure of data security when working in public places on free Wi-Fi, where a phishing attempt may reveal confidential information.
- Limited evaluation of fraud risk in the virtual environment.
- Inadequate monitoring of books and records for signs of fraud.
The fraud triangle. Fraud is more likely where three things meet: Pressure (for example financial hardship), Opportunity (which remote work can provide) and Rationalisation (the person justifies the act to himself).
Prevention measures:
- company-issued devices and equipment
- flexible schedules to reduce motive and opportunity for time theft
- updated best practice and training on working safely in public places
- time-tracking or productivity software
- anti-virus software and firewalls
- restrictions on sensitive financial and other information
- properly configured, secure routers
- company devices secured by a device management system with “find my device” switched on
- a screen time-out after one minute of inactivity
- a clear information system use policy
- training on the risks when data passes through a home network
- training on using a virtual private network (VPN) and virtual meetings
- levels of authorisation that continue remotely, using email audit trails and electronic signatures as proof of approval
Awareness of social engineering scams, and keeping staff connected through regular communication, also help.
The ideas in more depth
Matching controls to risks. A strong answer links each risk to a control: weak home networks to secure routers and a VPN, unlimited access to access restrictions, lack of supervision to time-tracking and authorisation trails, phishing to training, and lost devices to device management. Blockchain and AI also change controls: blockchain gives a tamper-resistant record, and AI monitors for unusual patterns.
Background (general knowledge). A hash is a fixed-length code worked out from a file by a mathematical function. Changing even one character gives a different code, which is why matching hashes prove a file is unchanged. AI tools learn from past data and can make mistakes, so their output should be reviewed, especially where a payment or a tax filing depends on it.
Blockchain records show that something was recorded, but do not prove the underlying transaction was genuine, so controls over the input are still needed.
Worked example: Surulere Distributors Ltd
Scenario. Surulere Distributors Ltd made 120 supplier payments totalling ₦38,400,000 in a month. Its AI tool flags three duplicate payments: ₦450,000, ₦280,000 and ₦95,000. Separately, a payroll officer who works from home and faces money problems has an unlimited access to the payroll system, and uses her own laptop. Required: the value of the duplicates, and the three sides of the fraud triangle with controls.
- Duplicates.
450,000 + 280,000 + 95,000 = ₦825,000, which is 825,000 ÷ 38,400,000 = 2.1% of the payments.
The company can recover them and treat them as a control failure. - Pressure. Her financial problems.
- Opportunity. Unlimited access to payroll, no supervision, and a personal laptop.
- Rationalisation. She may tell herself she is only borrowing the money or is underpaid.
- Controls. Restrict her access to what the role needs. Issue a company laptop managed with device management. Require two people to authorise payroll changes, with an electronic approval trail. Use AI or exception reports to flag unusual payroll changes. Provide fraud-awareness training, and keep her connected through regular communication.
Common mistakes in the exam
- Describing blockchain as a spreadsheet kept by one person. It is shared and distributed.
- Saying that blockchain makes all fraud impossible. It makes altering recorded entries very hard, but wrong input is still wrong.
- Mixing up a hash with a password.
- Listing AI tasks without saying what each does.
- Forgetting that the three parts of the fraud triangle are pressure, opportunity and rationalisation.
- Giving controls that do not match the risks listed.
- Forgetting the people controls: training, awareness and communication.
- Saying remote work is always high risk, when the point is that controls must change.
Quick revision
- Blockchain: distributed ledger of linked, time-stamped blocks, verified by most nodes.
- Benefits: automatic verification, cheaper audit, hash for integrity, smart contracts, fewer frauds, audit trail.
- AI: automation, real-time analysis, fraud detection, audit, forecasting, NLP, chatbots.
- Remote fraud: weak supervision and networks, unlimited access, public Wi-Fi, poor monitoring.
- Fraud triangle: pressure, opportunity, rationalisation.
Practice questions
These are original questions in the style of the Institute of Chartered Accountants of Nigeria (ICAN) exam. Try each one first.
Section A style: multiple choice
Question 1. A blockchain is:
- A spreadsheet kept by one clerk
- A bank account
- A distributed ledger of time-stamped blocks, each linked to the one before
- A type of invoice
Show the answer
C. It is shared by nodes and is hard to alter.
Question 2. A new block is added to a blockchain when:
- Most of the nodes verify the transaction
- The chief accountant signs it
- The bank approves it
- The auditor requests it
Show the answer
A. Peer-to-peer nodes verify it, and a majority agreement creates the block.
Question 3. A smart contract is:
- A contract signed on paper
- A contract with a lawyer
- A bank guarantee
- A computer program that runs when conditions are met, such as an invoice that pays itself
Show the answer
D. It executes automatically when the agreed conditions are met.
Question 4. The hash of an electronic file is:
- Its price
- A digital fingerprint used to prove the file is unchanged
- A password for the file
- Its size
Show the answer
B. If the new hash equals the stored hash, the file is unchanged.
Question 5. AI helps to detect fraud by:
- Printing cheques
- Storing paper files
- Increasing the number of staff
- Using pattern recognition to find duplicate and suspicious payments
Show the answer
D. It finds irregularities in large volumes of transactions.
Question 6. Natural language processing in accounting can:
- Extract information from contracts and invoices
- Sign cheques
- Replace the auditor’s report
- Prepare tax payments without review
Show the answer
A. It can also summarise statements and help write reports.
Question 7. The fraud triangle consists of:
- Cost, speed and quality
- Pressure, opportunity and rationalisation
- Debit, credit and balance
- Assets, liabilities and equity
Show the answer
B. Fraud is more likely where all three are present.
Question 8. Which of these is a fraud risk of remote working?
- A strong office firewall
- Company-issued devices
- Using unprotected public Wi-Fi
- Training in security
Show the answer
C. A compromised public connection can lead to a data breach.
Question 9. Which is a preventive measure for remote working?
- Company-issued devices secured by a device management system
- Unlimited access for all staff
- Default router passwords
- Personal devices without controls
Show the answer
A. Secured company devices reduce data theft.
Question 10. A likely effect of blockchain on the role of accountants is a move from:
- Interpreter to record keeper
- Auditor to clerk
- Manager to cashier
- Record keeper to interpreter of financial statements and facilitator of decisions
Show the answer
D. Routine recording is automated, so the focus moves to interpretation and advice.
Section B style: written questions
Question 11 (10 marks). (a) Explain what a blockchain is and how a transaction is added. (4 marks) (b) State six benefits of blockchain to accounting. (6 marks)
Question 12 (20 marks). (a) State six activities that artificial intelligence can perform in financial accounting. (6 marks) (b) Explain six opportunities for fraud that arise from working remotely. (6 marks) (c) Recommend eight measures to prevent fraud in a remote working environment. (8 marks)
A further written question
Question 13 (10 marks). A payroll clerk who works from home under financial pressure has unlimited access to the payroll system. (a) Explain the three elements of the fraud triangle in this case. (3 marks) (b) Recommend four controls. (4 marks) (c) Explain how AI could help to detect payroll fraud. (3 marks)
Model answers
Show the model answer to Question 11
(a) A blockchain is a distributed ledger made of time-stamped blocks, each linked to the previous block, which records transactions in a way that is hard to change. When a transaction is requested, it is sent to peer-to-peer nodes, which verify it with an algorithm. If most of the nodes verify it, a new time-stamped block is added to the chain and the ledger is updated.
(b) Any six:
- auditors can verify data automatically
- lower audit cost and time
- proof of file integrity through a hash
- smart contracts
- less manual recording and verification
- fewer errors and frauds because entries are sealed and distributed
- a traceable audit trail
- automated authentication
Show the model answer to Question 12
(a) Any six:
- data entry and reconciliation
- invoice processing
- bank and credit card matching
- real-time analysis of trends and anomalies
- fraud detection, such as duplicate payments
- audit and compliance support
- predictive forecasting
- natural language processing of contracts and statements
- chatbots for routine queries
(b) Lack of supervision, allowing time theft, payroll fraud and data theft. Weak cyber security on home networks.
Unsupervised and unlimited access to systems. Exposure of data on public Wi-Fi and phishing. Limited evaluation of fraud risk in the virtual environment. Inadequate monitoring of books and records.
(c) Company-issued and secured devices; restricted access to sensitive information; anti-virus software and firewalls; secure routers; device management with “find my device”; a screen time-out; an information system use policy; training on risks, public places and VPN use; time-tracking software; authorisation trails and electronic signatures.
Show the model answer to Question 13
(a) Pressure is her financial hardship. Opportunity is unlimited, unsupervised access to payroll. Rationalisation is that she can justify the act to herself, for example as a loan she will repay. (b) Restrict her access to what the job needs. Require a second person to authorise changes, with an electronic audit trail. Issue a secured company device. Provide fraud-awareness training and keep her connected to the team.
(c) AI can compare payroll data over time and flag unusual changes, such as new employees, changed bank details or duplicate payments, and send exceptions for review.
Pathfinder on Artificial intelligence, blockchain and remote-working fraud
These are the ICAN Pathfinder questions that test this topic. ICAN owns the questions and the suggested solutions, so we point you to them and do not copy them. Open your Pathfinder, attempt each question under exam conditions, then check your answer against the notes above.
Asks you to explain the impact of digital technologies on accounting systems, focusing on machine learning and artificial intelligence, data analytics, mobile accounting and specialised accounting software. The artificial intelligence part is covered here.
Revise first: Artificial intelligence in accounting
Blockchain, artificial intelligence and the fraud risks of remote working are new syllabus items, and no past diet asks for blockchain or remote-working fraud directly. Expect definitions, the benefits of blockchain, the uses of AI, the opportunities for fraud, and the measures that prevent it. Check Section A of every diet you practise.
Revise first: Fraud risks of remote working
Questions that ask for benefits, risks and recommendations on a technology are likely to be set as 6 to 10 mark parts of a longer question. Prepare a list of points for each technology.
Revise first: Blockchain technology
Source: ICAN Pathfinder, Financial Accounting. Diets covered: May Diet, 2024. Blockchain, artificial intelligence and remote-working fraud are new syllabus items and only May Diet 2024 asks for any related item. Diets before November 2014, and November Diet, 2024 onwards, are not covered here.
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