Wednesday, June 18, 2014

The AQM, Part 2: What does it mean to filers?


In the first part of this two-part discussion, we reviewed what the U.S. Securities and Exchange Commission (SEC) Accounting Quality Model (AQM, or "RoboCop") is using to evaluate public filings. The AQM was designed to help automate and streamline the review process of the eXtensible Business Reporting Language (XBRL) instance document, the machine-readable version of a filer's quarterly report.

Additionally, we looked a little deeper at how discretionary accruals are typically used to assess the probability of "earnings management". This can be problematic as it can lead to false positives, so the SEC is trying to shore-up this process by further by parsing discretionary accrual factors. They do so by categorizing them for deeper analysis as either factors that indicate earnings management and those that induce earnings management.

Wednesday, June 4, 2014

The AQM, Part 1: What is it looking at?


We would like to take a deeper look at the U.S. Securities and Exchange Comission’s Accounting Quality Model, informally known as RoboCop. We will do this in two parts, assessing what the AQM is using for its analysis, and then we will offer some thoughts on what it means for your company's filing.

There has been a lot of talk in the past year about the Accounting Quality Model (AQM)—nicknamed RoboCop—the U.S. Securities and Exchange Commission’s (SEC) tool designed to evaluate and analyze eXtensible Business Reporting Language (XBRL) filings from public filers. More specifically, the AQM has been designed to flag questionable or fraudulent filings based upon SEC-designed algorithms, including an evaluation of a company’s filing against its industry peer group. We thought it might be useful to dig a bit deeper into what the AQM actually is, along with its potential impact on the filing landscape.