Thursday, August 8, 2013

XBRL Audit: The Future is Now

by: Paul C. Bevins, Account Executive

XBRL and audit, the future is now. In the coming weeks and months the last remaining companies that currently enjoy temporary XBRL legal liability immunity will see their grace periods come to an end. This will create a very real and immediate need for an XBRL audit process, and with that accurate, speedy and cost-efficient software tools.

The possibility of a filing being at risk for errors and omissions is very real. Until now, most filers have not had to worry about the quality of their XBRL filings, only that they filed something to comply with the U.S. Securities and Exchange Commission (SEC) requirement.

As such, quality control measures may have been lacking during the filing process. However, with the expiration of litigation relief, filers will soon realize that they need to be certain that their XBRL instance-creation software is robust, that their XBRL staff has the requisite expertise, and that the XBRL filing does in fact contain exactly the same information as their HTML filing.

This should be concerning for filers as more and more data is converted to XBRL, and more investors start to see and analyze years of real, accurate and accessible financial information. Investment decisions will accordingly become increasingly based upon the as-filed XBRL, and it should be even easier to do just that with the growing access to XBRL analysis tools.

These tools allow the everyday investor to select a few XBRL tags that they regard as key performance indicators and make reasonable investment decisions based upon that information. Along with this unprecedented access to financial information, it follows that someone will eventually make an investment decision that is based upon bad information. And when that happens, companies will want to ensure that they are covered legally.

Did the filers do their due diligence when it came to ensuring the accuracy and completeness of their XBRL filings? How can they be certain of this?

In recognition of the expiration of the liability waiver, the American Institute of Certified Public Accountants (AICPA) has published guidelines by which all independent auditors should assess the quality of a registrant’s XBRL filings. In broad stroke, the AICPA wants to ensure that all XBRL filings are checked for completeness, mapping, consistency and structure.

Want to learn more? Please also read what “Treasury & Risk” says, and check back here in a few weeks for the next blog in this series on “What are Common Mistakes Found in XBRL filings?”