TECHNOLOGY XBBy Kristine Brands,R CMA L XBRL and Auditing With its standardized data structure, sion. This provision gives filers limited nished to filed , making them subject to eXtensible Business Reporting Language liability for data XBRL submissions for the same liability that applies to filing of (XBRL) is suitable for a company’s assur - 24 months after a company’s initial related documents under the Securities ance needs. This column examines compliance with the mandate or by Act of 1934 that could lead to civil and several of these opportunities, including October 15, 2014, whichever is earlier. criminal penalties. Filers must recognize the status of auditing XBRL-tagged This means that as long as a filer sub - that, sometime in the future, the SEC financial statements filed under the mitted its financial statements with tags may require an auditor’s attestation Securities & Exchange Commission (SEC) XBRL Reporting Mandate of 2009 and Despite the absence of an audit requirement, internal and external auditing using XBRL. companies need to be diligent about the quality of XBRL-tagged data. No SEC Mandate Audit Requirement—Yet The SEC mandate’s final rules don’t that were chosen in good faith and report for XBRL data. When and if this require a company’s auditors to audit corrected errors promptly, the filer becomes a requirement, the PCAOB XBRL-tagged financial statements or to wouldn’t face SEC liability penalties for would likely need to develop standards participate in the tagging process. This filing errors. The provision was adopted and add this requirement to its oversight is in sharp contrast to the position because of the developmental state of activity. described in the Sarbanes-Oxley Act of the initial U.S. Generally Accepted Despite the absence of an audit 2002 (SOX) in which the SEC was to Accounting Principles (GAAP) tax - requirement, companies need to be dili - require an external audit of a company’s onomies and the lack of tools available gent about the quality of XBRL-tagged internal control system —a requirement to evaluate the accuracy of the tags and data. The SEC evaluates all inbound that frustrated filers. In a 2005 Q&A for the tagging process, issues that have XBRL filings to identify outlier data, and AT Section 101, “Attest Engagements,” been addressed since the mandate’s SEC XBRL viewer tools (tools that read the Public Company Accounting Over - effective date. an SEC filing’s tagged data and render it sight Board (PCAOB) said it permits The key language in the provision is as a financial statement) are readily avail - third-party assurance of tagged state - that the company’s interactive data is able that allow the public to access fil - ments because tagging is an element considered furnished , not filed . The SEC ings. This means that a company’s filings of disclosure controls and procedures. hasn’t issued a statement about post - can be used to generate SEC comment This is strictly voluntary, but filers need poning the provision’s expiration date. letters and that the filings are readily to monitor a key provision of the Expiration of the provision means that accessible through the Internet. The mandate—the modified liability provi - the statements’ status changes from fur - mandate has achieved transparency of 56 STRATEGIC FINANCE I February 2013 SEC XBRL-filed financial statements, one and external audit functions because of a higher degree of reliability for audit of its main objectives. Companies whose information comparability. If an organi - evidence because it’s automatically filings aren’t high quality face increased zation’s business reporting supply chain generated from the company’s data scrutiny from their stakeholders and the has XBRL-enabled systems, audit re - source—the company’s ERP database. SEC. quirements can be met with XBRL-GL Conventional auditing approaches rely Now let’s turn to how a company’s information such as the annual financial heavily on document photocopies and XBRL-tagged data can be leveraged for statement audit. Continuous auditing is manually prepared spreadsheets, internal and external auditing. a tool that organizations can use to processes that lengthen data gathering achieve that objective. and are prone to error. Additional XBRL Internal and External CA is a technology model that audits taxonomies needed to facilitate auditing Auditing with XBRL accounting data in real-time or soon are audit schedules, work papers, and Two XBRL tools that can facilitate inter - after recording transactions. Accounts audit opinions. If external stakeholders, nal and external auditing are the XBRL- can be audited directly from within the such as banks and suppliers, have XBRL- GL (Global Ledger) and continuous company’s ERP system with an embed - based systems, data sharing and transfer auditing (CA). The XBRL-GL is a taxon - ded auditing module or by transferring can be performed continuously between omy that defines financial and business the data from the company to the data - the company and these parties to meet information used in a general ledger to base of the company’s auditor. The com - audit requirements. enable a company to embed XBRL at pany can map and tag its accounts to the transaction level in its enterprise taxonomies that auditors also use, such What’s the Outlook? XBRL reporting is gaining traction and If an organization’s business reporting supply acceptance. Leveraging it for the assur - ance function is another example of how chain has XBRL-enabled systems, audit require - it can be used to streamline business ments can be met with XBRL-GL information… processes to help companies save time and money and improve the quality of resource planning (ERP) system. The as the U.S. GAAP taxonomy and XBRL- financial reporting. SF value of this framework is that it allows GL. There are several advantages to this an organization to assign XBRL tags to approach. Auditors can use tools that Kristine Brands, CMA, CPA (Minn.), is an its financial and business transactions, are standardized on a recognized XBRL assistant professor at Regis University in account balances, and data master files. taxonomy to reduce the time and cost of Colorado Springs, Colo., and is a mem - It’s also a tool that multinational compa - the audit analysis because it’s unneces - ber of IMA’s XBRL Advisory Committee nies can use to standardize their general sary to customize audit analytical and and IMA’s Pikes Peak Chapter. You can ledgers, which facilitates the internal testing tools for each client. There’s also reach her at [email protected] . February 2013 I STRATEGIC FINANCE 57.