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Impact of XBRL on Financial Auditing
Impact of XBRL on Financial Auditing
Extensible Business Reporting Language XBRL is a business reporting standard. XBRL attempts overcome the limitations of traditional financial reporting. XBRL makes use of the concept of taxonomies for enhanced financial reporting. Head over to my post on XBRL taxonomies for a detailed discussion. I am pretty excited about XBRL and its future. As I write this post at the O'Hare airport, I am trying to think how XBRL will impact financial auditing in years to come. Here are a couple of pointers on how XBRL will affect financial auditing.
1. Better and simpler access to information to both the management and auditors.
2. XBRL will definetly improve auditor efficiency by enabling auditors to focus on high end investigative tasks.
3. Going forward, I see companies which adopt XBRL moving to real time reporting. XBRL will help auditors to validate and audit data much more in real time than they are able to today.
4. XBRL will enable auditors to focus on financial metrics or key set of dashboard figures to make critical judgements on financial statements.
5. Needless to say, with XBRL, auditors would be in amuch better position to compare data across companies based on the defined XML standard.
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1 comment
Considering end reporting, you are spot on. SOx 409 and other pressures for real-time disclosure needs as friction-free a reporting environment as possible, and XBRL can be an important part of that story. Movement of data from client to auditor (internal and external) will be streamlined. Getting data for benchmarking can be with less manual effort.
Of course, auditing when XBRL is the primary "original document" raises new challenges for the profession. XBRL does not "present" - it "represents". "Taken as a whole" and materiality may also be challenged. The XBRL community is dealing with these issues and looking for others with an interest to take part.
When you add XBRL GL, the standardized Global Ledger, to the picture, we now have the ability to get evidence in a standardized fashion along with assertions. Audit testing can be integrated and human interaction by exception only. The tax audit community is working closely with the XBRL community to consider how XBRL (and especially XBRL GL) can be an important part of establishing the "Seamless audit trail"; one set of standards for improving the controls environment, facilitating internal and external financial audit, as well as tax audit. Tools like IDEA are already available to understand XBRL GL's standardized tags and reduce the manual tasks involved in working with data from multiple systems as if they were one.
If you have an interest in real-time audit and possibilities with XBRL, check out http://raw.rutgers.edu - you will find presentations on both topics.
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