Blockchain Technology

In our previous blog posting, Faith Lamprey demystified the technology of Electronic Data Interchange (EDI) for us. So we thought … why not tackle another technology for our readers?

In this posting, a trio of PC professors discusses the mechanism of the blockchain. As is now our customary practice, we peer reviewed this posting in a blind review format to ensure the quality of the content.

Stephen Perreault
Stephen Perreault

Organizations are now exploring the adoption of an innovative new technology that could improve the reliability of business information. This technology, known as blockchain, utilizes a network of many independent parties to authorize and record transactions on a public ledger.

Why a public ledger? This approach allows many different sources to confirm proposed transactions, creating a multi-party validation system that is purportedly impervious to unauthorized modifications that violate the existing record. Thus, information that is created with blockchain technology is supposedly more accurate and more verifiable than transactions that use traditional authentication methods.

Here’s a simple example regarding a credit card purchase between a customer and an online vendor. Normally, when a customer submits an order, the vendor checks with a single financial intermediary to confirm that the customer has sufficient credit to complete the transaction. The vendor only seeks a confirmation with a single bank and, once the confirmation is received, the bank updates its records to reflect the new credit balance.

Now imagine that the same purchase is verified using blockchain technology. Under this scenario, the vendor seeks an authorization for the transaction among all parties in the blockchain network. All of these parties have a current and complete copy of the customer’s available credit, and thus all can reach a joint consensus on the customer’s ability to pay for the transaction.

When they reach this consensus, they all add a new transaction (i.e. a block) to the existing record (i.e., the chain), thereby creating a shared recording of the transaction. Every party on the network can then use the new chain immediately as an updated record to authenticate future transactions.

Because multiple parties confirm each transaction, it is purportedly very difficult to manipulate the data without authorization. Therefore, this approach represents a potential improvement for organizational record keeping, although it presents new challenges for business enterprises and their auditors.

Stephen Kuselias
Stephen Kuselias

What challenges? Ironically, some believe that blockchain technology may become disruptive to the audit profession because it provides opportunities to verify transaction data more effectively and efficiently than current audit methodologies. In other words, it may reduce audit costs and improve audit quality simultaneously.

Consider the case of an auditor testing the existence of a client’s recorded revenue. This assertion is typically tested by confirming a sample of transactions with a client’s customers, and then by examining sales invoices, cash receipts, and other supporting documentation.

These audit procedures are often time-consuming because customers may not respond to confirmation requests in a timely manner, and because supporting documentation is often paper-based and must be carefully scrutinized for reliability.

Using blockchain technology, sales transactions between an audit client and its customers are recorded in a public general journal. An auditor thus needs only to verify that a transaction is recorded in a blockchain in order to test whether a revenue entry is supported by a customer payment. Because the blockchain is stored across a network of computers, and not within a single centralized database, falsification of the transaction data is supposedly impossible.

In other words, the simple existence of the relevant block provides the audit evidence that the transaction actually occurred between the parties. A verification process such as this could easily be automated, reducing the need for intervention by a human auditor. This is why the technology may prove disruptive to the audit profession.

You may have noticed, though, that we keep using the words “purportedly” and “supposedly” while describing the presumption that falsification of information within a blockchain is extremely difficult or even impossible. Why do we keep doing that?

Michael Kraten
Michael Kraten

It’s because, in the world of online technologies, hackers have become proficient at coordinating unauthorized invasions of web sites and other systems by widely distributed servers, personal computers, and web-connected home devices. Recently, for instance, a public utility in New England was attacked by thousands of such devices, operating under the control of an anonymous entity.

Proponents of blockchain technology assure us that the distributed nature of its record keeping function provides a higher level of authenticity. And yet, given the ongoing threat of Distributed Denial of Service (DDoS) attacks, such assurances should not be taken for granted.

by Michael Kraten, Stephen Kuselias, and Stephen Perreault (in alphabetical order)

How EDI Helped Santa Deliver Presents This Christmas

We’re delighted to introduce an exciting new feature on our blog! Beginning with this post, we are peer reviewing all intellectual content in a blind review format.

That’s a standard scientific approach for ensuring the quality of our published material. When we receive each piece from its author, we send it to a reviewer with expertise in the subject matter. The reviewer communicates concerns and suggestions to the blog editor and publisher, who holds independent discussions with the reviewer and the author.

The author then revises and resubmits a final version for publication. Throughout the process, the author and reviewer remain anonymous to each other.

To the best of our knowledge, we’re the first academic institution anywhere to adopt a standard policy of blind reviewing intellectual content for a blog. The process does indeed require more effort … but it’s a small burden to bear for scientific integrity!

And without further ado, here is our first-ever peer reviewed blog posting:

lampreyThis past year, for the first time ever, online sales in the U.S. surpassed in-store purchases. An annual survey by analytics firm comScore and UPS found that U.S. consumers are buying more items online than in stores. The survey, now in its fifth year, polled more than 5,000 consumers who made at least two online purchases in a three-month period.

According to its results, shoppers now make 51% of their purchases online, compared to 48% in 2015 and 47% in 2014. Cyber Monday achieved a new record this year, with $3.45 billion spent online, a 12.1 percent increase over 2015. This was the largest online sales day ever in the United States.

Most people have become very comfortable with, and even reliant on, buying products online. For many of us, it is now our preferred method of purchasing goods.

Are you aware of what is working 24/7 “behind the scenes” to streamline and automate the entire process? No, it is not Santa’s Workshop of Elves! It is a technology called Electronic Data Interchange (EDI), and it has been deployed by companies for decades, long before the Internet became a household word.

In fact, EDI helps us without any one even knowing it! For instance, each time we visit our doctors, when they file claims with our insurance companies for payment, the requests are transmitted electronically using EDI. And when we use Tax Software to prepare our tax returns and hit the Send key to transmit them to the IRS, the software converts our data into an EDI format and delivers the content electronically in seconds.

EDI communicates business transactions between Trading Partners via documents in standard electronic formats. The data that is generated from each transaction is “mapped” onto EDI data segments and then transmitted between Trading Partners. When data is received by the Trading Partners, the EDI data segments are “mapped” to their application files, and the data is processed accordingly. When set up properly, this can all be accomplished without any human intervention.

So how does EDI help with online ordering? Online Retailers rely on numerous suppliers to stock adequate inventories of the items they sell to consumers. They require their suppliers to ship the items directly to us. Even mighty Amazon does not stock all of its items for sale in its own warehouses!

Suppliers use electronic catalogs (in EDI, we call them 832 Catalogs) to post their items online with product descriptions, pictures, and pricing information. This information can be used to populate the item information on web sites. The suppliers send their available inventories (via 846 Inventory Inquiries / Advices) to the online retailers so they can communicate, on their web sites, how many of each item remains for sale.

When we place an order, the web site sends it to the supplier via an 850 Purchase Order, with codes to indicate that the order should be drop-shipped directly to us. The supplier acknowledges to the retail web site system via an 855 Purchase Order Acknowledgement that the order was received, and that it can ship the item.

When our order is ready to ship, the supplier sends all of the shipping information to the online retailer via an 856 Advanced Shipping Notice. It then sends us a “Your Order Has Shipped” e-mail message. The supplier also sends the online retailer a bill for the item shipped via an 810 Invoice.

There is even an EDI document, called an 820 Remittance Advice, that informs the supplier that payment has been made. It can also instruct the retailer’s bank to initiate a funds transfer to the supplier.

Faster than Santa can lay his finger aside of his nose, give a nod, and rise up the chimney, EDI can help to make sure that our orders are processed and delivered in time to place under the tree for Christmas morning.

This article has been re-posted on Faith’s web site. Please feel free to visit her there!

Faith Lamprey

 

There Is A Santa Claus

Happy 2017! We certainly hope that you experienced a joyous holiday season.

As you may recall, in our previous blog posting, we sent a letter to Santa Claus and requested a new business school building. Although we’ve come to love and cherish our longstanding home in Koffler Hall, we’ve grappled with the challenge of growing into a world-class institution within a fairly constrained space.

And guess what occurred? It was a Christmas Miracle! Yes, Providence Friars … there is a Santa Claus, and he responded to our request magnificently.

ryanOr perhaps it would be more accurate to say that Santa arranged for Arthur F. and Patricia Ryan to join other generous donors by providing the funds for our new home. This week, we are moving into our new Ryan Center for Business Studies … just in time for our Spring semester to begin on Tuesday.

As you can see, there are still a few “wrappings” to remove from the building. Nevertheless, we’re already finding ways to put it to good use.

If you’re ever in the neighborhood and would like to pop in for a friendly tour, you’re welcome to reach out to our Department Chair Christine Earley and let her know your plans. Or you can simply use the “Contact Us” app on our blog’s home page to reach us.

Most importantly, you can rest assured that the spirit of Christmas is thriving at Providence College. Here at the Ryan Center, we’re determined to keep it alive throughout the year.

A Letter To Santa Claus

Dear St. Nicholas (aka Santa):
From the Department of Accountancy

We sincerely hope that you enjoyed visiting our campus, earlier this month, for the third international St. Nicholas of Myra Conference on Catholic Social Thought.

As you know, Santa, Christmas Eve is right around the corner. We’ve been considering our options regarding a gift request, and we regret that we have a rather sizable “ask” for you this year.

Would it be possible to drop a new business school building into our stocking? We’ve done everything possible to “make do” with Koffler Hall, but it’s become difficult to recognize our potential as a fast growing, world class business school within a building that was originally built for a much smaller program.

We don’t want to be greedy, so we’d be delighted with anything you provide that fits snugly within our Providence College Centennial Campus Plan. Does this look reasonable to you?

ryan

Of course, to start paying down our indebtedness to you, we’ll curtail our natural naughtiness. And we’ll increase our levels of niceness, effective immediately.

Thanks very much for your consideration, Santa. We’ll be sure to leave you a large plate of cookies on Christmas Eve … assuming that the gesture doesn’t run afoul of any conflict-of-interest ethical guidelines at the North Pole Justice Department, of course.

Regards,
The Accounting Friars

St. Nicholas On Campus

stnickHave you stopped believing in Santa Claus? Well, after you read this blog entry, you may need to reconsider your skepticism! After all, St. Nicholas actually visited our campus earlier this month, and was addressed by two Providence College professors and one accounting program alumnus.

This startling activity occurred at the third international St. Nicholas of Myra Conference on Catholic Social Thought, held on campus in our Ruane Center for the Humanities. Finance professor David Zalewski, Accountancy program alumnus Jim Klinger of IFC Asset Management (the private equity arm for the World Bank), and Accountancy professor Michael Kraten joined a panel discussion entitled Catholic Social Teaching and the Development of Human Capital.

Mike led off by addressing the impact and structure of the Libor global banking scandal. Dave then discussed taxation and other regulatory policies that affect the labor markets. And Jim followed by discussing how he applies principles of Catholic Social Thought in his own professional role within the financial services industry.

Their comments stimulated lively debates throughout their session and into the subsequent dinner hour. According to Jim, “It was a pleasure and an honor to return to campus to explore the implications of Christian theology on business practices before a variety of professors and students. I look forward to continuing our conversations, and to acting on what we talk about.”

Added Dave, “The conference provided an excellent opportunity to bring together scholars and practitioners from both business and the humanities to discuss the contribution Catholic social teaching can make in improving economic welfare.”

Mike agreed, noting that “Academics are sometimes accused of working in silos. And yet we were able to ‘make the connection’ between the global banking system, national taxation policy, and the theological underpinnings of our ethical and moral codes of conduct … all within our panel discussion!”

Indeed, our dynamic trio fully engaged the audience, and we can only hope that they pleased the spirit of St. Nicholas as well. After all, the Accounting Friars of Providence College will send Santa a letter soon, asking him for a suitable Christmas gift to enjoy throughout 2017 and beyond. We’ll publish that letter in a forthcoming blog entry.

To Be Continued …

Image Credit: Wikipedia Commons File Ferapontov.jpg. This work is in the public domain in its country of origin and other countries and areas (including the United States) where the copyright term is the author's life plus 100 years or less.

Santa’s Accountants

This brief posting provides an update to our November 2, 2016 posting entitled “The Rhode Island Olympics.”

How would you like to wake up on the morning of Christmas Day and find 303 boxes of art supplies, 42 backpacks, 32 throw blankets, 23 boxes of diapers and formula, and 16 basketballs and footballs in your gift stocking? As well as $2,000 in cash, $540 in gift cards, and 44 hours of community service time?

In effect, that’s what the families who rely on Child & Family’s programs and services received from the Rhode Island Society of CPAs on November 9th, in connection with its Rhode Island Olympics. Held for the third consecutive year on the campus of Providence College, more than one hundred accounting professionals and students formed fourteen teams and competed for the RISCPA Cup.

The winner was Carl Weinberg & Co., LLP, a Warwick based accounting firm. They defeated a Big Four firm, several regional and local firms, and accounting students from Providence College and Johnson & Wales University. Considering the home court advantage enjoyed by the Friars of Providence College, it may have represented the greatest competitive upset of the year.

Well, perhaps the second greatest upset, given the results of the preceding day’s U.S. Presidential election!

The competition was paired with a holiday donation campaign for Child & Family, one that produced the impressive array of charitable gifts. It provides clear evidence that the spirit of Santa Claus is alive and well in the accounting profession.

PwC Challenge Champions

On November 7th, 45 Providence College students comprising 9 student teams entered the hallowed halls of the Ruane Center for the Humanities to participate in the 2016 PwC Challenge Case Competition.

The winning team poses for a group photo with their mentors and PwC professionals.
The winning team poses for a group photo with their mentors and PwC professionals.

This year’s case addressed the issue of sustainability. The student teams were each asked to develop and present a strategic plan for a company grappling with a difficult environmental challenge.

The teams completed their presentations with the guidance of twelve student mentors, their faculty mentors, and eight PwC mentors who were Friar alumni. After delivering their presentations, each team answered questions about its proposal from a panel of judges, all of whom were Friar alumni and partners with PwC.

According to Friar alumnus John Formica, Assurance Partner and New York Metro Industrial Products Business Development Leader at PwC:

This year’s Challenge competition included a record number of freshmen and STEM majors. PC’s diversity of students really impacted the creativity of the solutions for the case’s Green Light Tire executive team to consider in evaluating the presentations.

Overall, it was another remarkable evening, filled with anticipation, excitement and exhilaration. Although one team inevitably emerged as the overall PC Champion, each student who participated, including the mentors, truly experienced an important learning event.  Hats off to all for another great Challenge event!

While the level of competition at this year’s event was extremely high, when the dust settled, one team emerged victorious: Team Mind the GAAP. The team participants were Christopher Hill (2018 Accountancy), Taylor de Boer (2019 Finance and Marketing), Matthew Hunt (2019 Accountancy), Jillian Sweeney (2019 Accountancy and Management), and Michael McArdle (2020 Finance).

Caroline Haddad (2017 Accountancy and past PwC Challenge Champion), Friar alumnus Nick Sirianni of PwC, and Professor Julia Camp (Accountancy) served as mentors to the team.

An ecstatic Professor Camp remarked after the competition:

The team worked extremely hard preparing for their presentation. In fact, my job as a faculty mentor was easy because they were so well prepared. I am really proud of how they came together and presented in front of the judges! Caroline Haddad was also a big help, and had great insight and experience that she shared with the team.

In addition to the honor of being crowned the “2016 PwC Challenge Champions”, the winning team members received a generous cash prize provided by PwC. They have also been invited to a celebratory dinner hosted by Providence College President Father Shanley and Executive Vice President and Treasurer Father Sicard.

This year’s competition would not have been possible without the support of John Formica, Ann Ulett, Lauren Irwin, and all of the other professionals from PwC who supported and sponsored the event.  We thank them, as well as all of the Providence College faculty, administrators, and student mentors who gave so generously of their time to support this year’s Challenge.

Stephen Perreault

Valerie Peterson