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Triple Entry Accounting
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Triple Entry Accounting

A special issue of Journal of Risk and Financial Management (ISSN 1911-8074). This special issue belongs to the section "Business and Entrepreneurship".

Deadline for manuscript submissions: closed (30 November 2023) | Viewed by 21322

Special Issue Editor

Dr. Eva R. Porras

E-Mail Website
Guest Editor
Department of Business Economics (ADO), Applied Economics II and Fundamentals of Economic Analysis, Rey Juan Carlos University, 28933 Madrid, Spain
Interests: blockchain; artificial intelligence; exchange markets
Special Issues, Collections and Topics in MDPI journals

Special Issue Information

Dear Colleagues,

Triple-entry accounting is a topic that is attracting a considerable amount of interest in both academia and commerce, both as a means of enabling as well as enhancing future transactions and of reducing the scope for fraud as well as other malfeasance in current transactions.

Double-entry accounting (DEA) can arguably be seen as the foundational technology of the whole of our sophisticated society. Accounting can be used to provide equitable, transparent, and accountable outcomes for any and all ventures, from pop-up food trucks to universities to multinational corporations. There is, sadly, no guarantee that it will do this. The current state of the banking industry attests to this.

Triple-entry accounting (TEA), in the formal sense of the designation, as set out in the seminal 2005 paper by Ian Grigg, provides robust cryptographic means for eliminating much of the inadequacies of DEA.

As a topic, TEA is also a foundational contribution to the development of blockchain technologies.

A review of the literature and existing commercial applications on the topic of TEA indicates a lack of focus on the topic due to the absence of a specialized journal or conference with which to provide guidance and direct research activity.

The Peer For Peer Foundation (PFPF) is hosting an inaugural conference on TEA this November and intends to present papers of a publishable academic-grade standard. To that end, we would like to collaborate with MDPI as the publisher of these proceedings as a Special Issue under the auspices of its Journal of Risk and Financial Management. The PFPF appreciates that the JRFM is an ‘open source’ and SCOPUS-indexed journal with a wide range of review panelists and a reputation for an efficient review process.

Dr. Eva R. Porras
Guest Editor

Manuscript Submission Information

Manuscripts should be submitted online at www.mdpi.com by registering and logging in to this website. Once you are registered, click here to go to the submission form. Manuscripts can be submitted until the deadline. All submissions that pass pre-check are peer-reviewed. Accepted papers will be published continuously in the journal (as soon as accepted) and will be listed together on the special issue website. Research articles, review articles as well as short communications are invited. For planned papers, a title and short abstract (about 100 words) can be sent to the Editorial Office for announcement on this website.

Submitted manuscripts should not have been published previously, nor be under consideration for publication elsewhere (except conference proceedings papers). All manuscripts are thoroughly refereed through a single-blind peer-review process. A guide for authors and other relevant information for submission of manuscripts is available on the Instructions for Authors page. Journal of Risk and Financial Management is an international peer-reviewed open access monthly journal published by MDPI.

Please visit the Instructions for Authors page before submitting a manuscript. The Article Processing Charge (APC) for publication in this open access journal is 1400 CHF (Swiss Francs). Submitted papers should be well formatted and use good English. Authors may use MDPI's English editing service prior to publication or during author revisions.

Keywords

  • blockchain
  • transparency
  • cryptography
  • accountability
  • audit
  • AI legibility
  • governance
  • financial crisis
  • financial regulation

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Related Special Issue

Published Papers (7 papers)

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Research

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30 pages, 7828 KiB  
Article
Ostrom’s Razor: Using Bitcoin to Cut Fraud in Hollywood Accounting
by Ted Rivera and Dave Foderick
J. Risk Financial Manag. 2024, 17(4), 139; https://doi.org/10.3390/jrfm17040139 - 29 Mar 2024
Viewed by 2304
Abstract
The accounting principles prevalent in Hollywood are seemingly crafted to mislead creators and investors. Film studios and streaming platforms have been found to use complex strategies to annually divert millions in net profits. Many contracts include audit clauses, but the cost of auditing [...] Read more.
The accounting principles prevalent in Hollywood are seemingly crafted to mislead creators and investors. Film studios and streaming platforms have been found to use complex strategies to annually divert millions in net profits. Many contracts include audit clauses, but the cost of auditing a billion-dollar system is prohibitive for most creatives with “net profit” deals. However, a resourceful minority have recovered billions in profits and damages. We suggest using Bitcoin’s transparent, immutable ledger to eliminate fraudulent accounting and build trust among profit-seeking filmmakers willing to trade maximum income for maximum profit per share. This trust can be spread globally utilizing the Bitcoin network as a transparent and immutable triple-entry accounting system. Our research shows that distributing this decentralized trust is achievable by configuring an ecosystem of existing Bitcoin wallets, applications, and recorded contracts to create a universal source of truth for all parties assisting in the creation of valuable content in the form of movies. This network can form the foundation on which to build a legal blockchain infrastructure that can eventually facilitate the sale of tokenized securities, discretely disseminate recorded financial data, and transparently distribute revenue to a collective of filmmakers indefinitely. Full article
(This article belongs to the Special Issue Triple Entry Accounting)
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15 pages, 290 KiB  
Article
Triple-Entry Accounting and System Integration
by Pythagoras Petratos
J. Risk Financial Manag. 2024, 17(2), 45; https://doi.org/10.3390/jrfm17020045 - 25 Jan 2024
Viewed by 2471
Abstract
Triple Entry Accounting (TEA) provides an opportunity for fundamental change in accounting. TEA is a foundational development of Blockchain technology, which is considered a pillar of the Fourth Industrial Revolution. Nevertheless, in order to augment its impact, TEA should be integrated with other [...] Read more.
Triple Entry Accounting (TEA) provides an opportunity for fundamental change in accounting. TEA is a foundational development of Blockchain technology, which is considered a pillar of the Fourth Industrial Revolution. Nevertheless, in order to augment its impact, TEA should be integrated with other systems. This paper aims to examine the relationship of TEA with system integration (SI) and how it can affect integration. This study reviews the SI literature in the context of accounting, examines how the literature on TEA has evolved over the years, and finally contributes to the analysis of how TEA is related to integration. A key theme is the connection of accounting controls and system integration. The methodology of the four design principles of control in system integration is adopted. Transparency is the main perspective of these principles. It was found that TEA promotes transparency, reduces the risk of fraud, and facilitates system integration. Full article
(This article belongs to the Special Issue Triple Entry Accounting)
9 pages, 1005 KiB  
Article
A Private and Efficient Triple-Entry Accounting Protocol on Bitcoin
by Liuxuan Pan, Owen Vaughan and Craig Steven Wright
J. Risk Financial Manag. 2023, 16(9), 400; https://doi.org/10.3390/jrfm16090400 - 7 Sep 2023
Cited by 2 | Viewed by 1806
Abstract
The ‘Big Four’ accountancy firms dominate the auditing market, auditing almost all the Financial Times Stock Exchange (FTSE) 100 companies. This leads to people having to accept auditing results even if they may be poor quality and/or for inadequate purposes. In addition, accountants [...] Read more.
The ‘Big Four’ accountancy firms dominate the auditing market, auditing almost all the Financial Times Stock Exchange (FTSE) 100 companies. This leads to people having to accept auditing results even if they may be poor quality and/or for inadequate purposes. In addition, accountants may provide different auditing results with the same financial data. These issues are hard for regulators such as the Financial Reporting Council to identify because of insufficient resources or inconsistent compliance. In this paper, we proposed a triple-entry accounting protocol to allow users to report Bitcoin transactions to a third-party auditor to comply with regulations such as the travel rule. It allows the auditor to easily detect anomalies and identify the non-compliant parties, whilst the blockchain itself provides a transparent and immutable record of these anomalies. Despite building on a public ledger, our solution preserves privacy and offers an interoperability layer for information exchange. Merkle proofs were used to record non-compliant transactions whilst allowing compliant transactions to be pruned from an auditor’s active database. Full article
(This article belongs to the Special Issue Triple Entry Accounting)
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12 pages, 664 KiB  
Article
Triple-Entry Accounting as a Means of Auditing Large Language Models
by Konstantinos Sgantzos, Mohamed Al Hemairy, Panagiotis Tzavaras and Spyridon Stelios
J. Risk Financial Manag. 2023, 16(9), 383; https://doi.org/10.3390/jrfm16090383 - 27 Aug 2023
Cited by 2 | Viewed by 4818
Abstract
The usage of Large Language Models (LMMs) and their exponential progress has created a Cambrian Explosion in the development of new tools for almost every field of science and technology, but also presented significant concerns regarding the AI ethics and creation of sophisticated [...] Read more.
The usage of Large Language Models (LMMs) and their exponential progress has created a Cambrian Explosion in the development of new tools for almost every field of science and technology, but also presented significant concerns regarding the AI ethics and creation of sophisticated malware and phishing attacks. Moreover, several worries have arisen in the field of dataset collection and intellectual property in that many datasets may exist without the license of the respective owners. Triple-Entry Accounting (TEA) has been proposed by Ian Grigg to increase transparency, accountability, and security in financial transactions. This method expands upon the traditional double-entry accounting system, which records transactions as debits and credits in two separate ledgers, by incorporating a third ledger as an independent verifier via a digitally signed receipt. The utilization of a digital signature provides evidentiary power to the receipt, thus reducing the accounting problem to one of the presence or absence of the receipt. The integrity issues associated with double-entry accounting can be addressed by allowing the parties involved in the transaction to share the records with an external auditor. This manuscript proposes a novel methodology to apply triple-entry accounting records on a publicly accessed distributed ledger technology medium to control the queries of LLMs in order to discourage malicious acts and ensure intellectual property rights. Full article
(This article belongs to the Special Issue Triple Entry Accounting)
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Review

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20 pages, 2224 KiB  
Review
REA, Triple-Entry Accounting and Blockchain: Converging Paths to Shared Ledger Systems
by Juan Ignacio Ibañez, Chris N. Bayer, Paolo Tasca and Jiahua Xu
J. Risk Financial Manag. 2023, 16(9), 382; https://doi.org/10.3390/jrfm16090382 - 25 Aug 2023
Cited by 7 | Viewed by 2728
Abstract
During the last half century, the concept of shared ledger systems that offer a single source of truth has challenged traditional bookkeeping, leading to innovations such as the resource-event-agent (REA) accounting framework, triple-entry accounting (TEA), and blockchain. Despite these advancements, the historical development [...] Read more.
During the last half century, the concept of shared ledger systems that offer a single source of truth has challenged traditional bookkeeping, leading to innovations such as the resource-event-agent (REA) accounting framework, triple-entry accounting (TEA), and blockchain. Despite these advancements, the historical development of shared ledger systems remains under-researched and unclear, with the influence of REA on TEA particularly overlooked. This study aims to fill this gap by conducting a genealogical analysis of shared ledger systems, with a focus on tracing the development of TEA and its historical byproduct of the REA framework designed by McCarthy. Through a comprehensive literature review and interviews with pioneers in REA, TEA, and blockchain, we uncover the missing link between REA and TEA. Our findings suggest that the current explosion of shared ledger systems results from the convergence of three parallel research streams, occasionally interacting with each other. We correct common misconceptions, acknowledge the influence of key individuals, and map out the overlapping paths of REA, TEA, and blockchain. By elucidating the historical evolution of shared ledger systems, this study contributes to the academic debate and fosters further discourse among researchers in REA, TEA, and blockchain, thereby enhancing the potential applications within these fields. Full article
(This article belongs to the Special Issue Triple Entry Accounting)
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Other

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12 pages, 205 KiB  
Technical Note
Triple Entry Accounting
by Ian Grigg
J. Risk Financial Manag. 2024, 17(2), 76; https://doi.org/10.3390/jrfm17020076 - 14 Feb 2024
Cited by 3 | Viewed by 2699
Abstract
Classical double entry accounting has provided the foundation for accounting within the firm for many centuries. The digitally signed receipt, an innovation from financial cryptography, gives rise to exactly duplicated entries for each of 3 parties or roles, the outcome of which we [...] Read more.
Classical double entry accounting has provided the foundation for accounting within the firm for many centuries. The digitally signed receipt, an innovation from financial cryptography, gives rise to exactly duplicated entries for each of 3 parties or roles, the outcome of which we call triple entry accounting. This presents a challenge to double entry bookkeeping by expanding the use of accounting from inside firms to activity between the firms. When applied to digital cash and digital assets, the approach of negotiating a single signed receipt between parties lowers costs by delivering reliable data to support stronger accounting, and makes much stronger governance possible in a way that positively impacts on the future needs of corporate and public accounting. By turning the opinions of firm owners into facts agreed between firms, triple entry bookkeeping creates the bulletproof accounting layer to support aggressive uses and adversarial users such as are found in the Bitcoin system of transactions. Full article
(This article belongs to the Special Issue Triple Entry Accounting)
16 pages, 2952 KiB  
Technical Note
Implementing Triple Entry Accounting as an Audit Tool—An Extension to Modern Accounting Systems
by Torje Vingen Sunde and Craig S. Wright
J. Risk Financial Manag. 2023, 16(11), 478; https://doi.org/10.3390/jrfm16110478 - 10 Nov 2023
Cited by 1 | Viewed by 2854
Abstract
Despite the technological leaps modern accounting systems have brought about, fraud is still prevalent. This necessitates spending time and money on audits. Connecting modern accounting ledgers to a public blockchain would make accounting records easily verifiable, aiding the audit evidence gathering and analytics [...] Read more.
Despite the technological leaps modern accounting systems have brought about, fraud is still prevalent. This necessitates spending time and money on audits. Connecting modern accounting ledgers to a public blockchain would make accounting records easily verifiable, aiding the audit evidence gathering and analytics process. Continuous audits will be made viable by readily available audit evidence from the public blockchain. The proposed audit solution creates verifiable “Financial Fingerprints” (signed indexes) for every accounting entry. These Financial Fingerprints are then published to a certain range of addresses on the public blockchain. The objective is to help accounting ledgers be structured in a Triple Entry Accounting format. The third entry can be defined as publishing a notarized index of each accounting entry to the public blockchain. The crux of Triple Entry Accounting is atomicity, meaning there can only be one book. Trying to present an alternative set of books would still be possible, but it would be automatically detected. The method used to achieve the objective can be presented as two value propositions. The first value proposition of Triple Entry Accounting is to define a provable official true set of books. This is important because it is a door into the market without being dependent on network effects. The second value proposition of Triple Entry Accounting is to break down the data silos by using the blockchain as a shared ledger and thus help auditors immensely in their tedious work to gather sufficient and appropriate audit evidence. Because of value proposition number one, Triple Entry Accounting presents standalone value even before the network effect begins. The result of this is an open standardized protocol for implementing Triple Entry Accounting as an extension to modern accounting systems. Full article
(This article belongs to the Special Issue Triple Entry Accounting)
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