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Post on 25-Dec-2014




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  • 2. Introduction XBRL and its impact on the Assurance Environment Goal is to provide a two lenses of looking at XBRL Impact upon audit procedures Impact upon fraud detection Twofold view to provide current year and post year analysis
  • 3. Agenda XBRL goals, capabilities and functionality Audit procedures Continuous auditing Implications on fraud detection Automated detection Going forward
  • 4. XBRL : What is it? eXtensible Business Reporting Language >> XBRL Universal business taxonomy Define elements in the financial statements Goal: Facilitate the automated production and consumption of large volumes of business performance information with high degrees of data quality
  • 5. XBRL: Functionality Tagging of Financial Data AMOUNT Results in: Computer readable financial information, thus Shift from humans reading and analyzing, to computer algorithms, thus Rapid scalable increase in analysis capability and speed
  • 6. XBRL: Reason for implementation Technology has existed since Internet in the form of HTML Reasons for impact: SEC reporting requirements Improved analytical capability due to computing technology
  • 7. Audit Process: Impact Current Challenge: Information to be audited is only available after year end Contrasted with consumer demands for improved timeliness Drive to shift procedures to occur DURING the reporting period
  • 8. Audit Process: Continuous Audits Shifting audit procedures to during the reporting period Control testing But only prevents certain things from occurring Embedded Audit modules Tracks all transactions Screens on specific criteria and posts alerts upon red flags But low adoption across industries
  • 9. Audit Process: XBRL-GL Facet of the XBRL reporting environment Taxonomy used to report into a GL Corporate benefit Modular GL can be placed into various templates to support differing reporting standards / report to other organizations Auditor benefit Export data, run through audit modules
  • 10. Audit Process: Audit Implications Potential to bring back the continuous audit Time improvements Accuracy improvements Obligation to: Push for companies to increase usage of XBRL-GL
  • 11. Fraud Detection: Impact of Fraud $400 Bn of losses attributed to fraudulent activities in the United States But fraud detection is beyond the scope of auditors so why is it relevant? Changing technological environment threatens the relevance of the auditing profession
  • 12. Fraud Detection: Methodology Heavy area of research Focus upon development of fraud detection algorithm Success rates increasing 90% success in predictions Identification of statistically significant variables that predict the existence of fraud But Difficulties in entering data into models Reliance on manual or error prone data extraction processes
  • 13. Fraud Detection: XBRL implications XBRL reporting solves the data entry issue Can run company, or even industry wide financials through fraud detection models Widespread and comprehensive analysis Hole in the market for fraud detection software Auditor implications? Will we become irrelevant?
  • 14. Conclusion on Assurance Environment Impact Revolutionizes the concept of a continuous audit Makes it possible again Significant benefits and potential in developing automated fraud detection
  • 15. Going Forward Assurance Currently, no level of assurance required in the preparation of XBRL documents However, with increase in usage, demand for assurance will also increase Could change the role of auditors in terms of the scope of assurance required
  • 16. Conclusion XBRL = Paradigm shift in reporting environment Auditors have a responsibility to keep abreast of these changes else risks significant damage in: Value proposition of audits Reputation