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    Assurance on XBRL for Financial Reporting
    research summary posted April 13, 2012 by The Auditing Section, last edited May 25, 2012, tagged 01.0 Standard Setting, 01.01 Changes in Reporting Formats 
    Assurance on XBRL for Financial Reporting
    Practical Implications:

    Auditors should recognize that agreement between the rendered and source documents alone does not provide sufficient evidence that financial statements are appropriately tagged.  If issues regarding sampling and materiality cannot be sufficiently resolved, the alternative is 100 percent testing, which may be more expensive than investors, regulators, and other users are willing to pay.  Technological advances are likely to yield applications that assist auditors in determining the appropriateness of XBRL tags based semantic relationships.  As the public availability of XBRL-tagged data reaches a critical mass, auditors may leverage it to perform analytic procedures that can be relied on to create efficiencies in other aspects of an audit engagement.  Given the granular nature of the data-centric reporting environment, different levels of assurance (e.g., data-level and continuous assurance) are receiving considerable attention by academic researchers and may eventually lead to significant shifts in the assurance model, including the use of specialized audit teams and/or third-party providers.


    Plumlee, R. D., and M. A. Plumlee. 2008. Assurance on XBRL for Financial Reporting.  Accounting Horizons 22 (3):  353-368. 

    accountants' reporting; XBRL
    Purpose of the Study:

     This commentary raises several issues about the nature of assurance services in a data-centric reporting environment facilitated by eXtensible Business Reporting Language (XBRL), dubbed “interactive data” by the Securities and Exchange Commission (SEC).  Interactive data yields many benefits for end users.  However, the process of tagging and contextualizing financial facts creates another potential source of material misstatements.  The procedures needed to detect tagging errors are beyond the scope of a traditional financial statement audit.  As XBRL awareness increases, users will demand assurance that both the financial statement facts and the tagging of those facts are reliable.  This has important consequences for audit practitioners.

    Design/Method/ Approach:

     A sizable portion of the paper describes the history and technical features of XBRL to give readers sufficient background information to understand audit challenges posed by the tagging process.  Each audit issue is then discussed and supported by examples.

    •  The Public Company Accounting Oversight Board (PCAOB) and the American Institute of Certified Public Accountants (AICPA) have issued guidance for practitioners voluntarily engaged to examine XBRL-related documents that focuses on “agreeing” rendered XBRL reports with the traditional paper-centric documents (i.e., PDF, HTML or Word document).  This
      guidance caters to users who primarily rely on the printed form of financial statements and ignores how underlying tagging errors can affect computer interpretation of financial data.
    •  Current guidance suggests that auditors might use sampling techniques.  However, traditional sampling links the dollar amounts of account balances to selection probability, and it is not clear whether these techniques can be appropriately adapted to test the qualitative nature of the XBRL tagging process. 
    •  The concept of materiality has different implications for the planning of audit procedures in the XBRL environment because the risk of material mistagging is unrelated to item size (i.e., a single inappropriate or missing tag could result in the statement “taken as a whole” being materially misstated).  Furthermore, evaluation of materiality, as it relates to the financial statements taken as a whole, might no longer make sense if users selectively extract individual financial facts for peer group analysis.
    •  The XBRL assurance process is complicated by the ability of firms to create extension taxonomies (i.e. firm-specific tags that do not exist in the standard base taxonomy) because the appropriateness of such extensions is highly judgmental.
    •  The scope and form of XBRL assurance engagements has been debated.  Future considerations include whether assurance should be provided on all XBRL-related documents or just the instance document, and whether alternative engagements (i.e., reviews and agreed-upon procedures) would satisfy investors’ needs.
    Standard Setting
    Changes in Reporting Formats, Changes in Reporting Formats
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