1. Impact of XBRL on
Assurance Environment
REPORT TO ACC 626: IT ASSURANCE AND COMPUTER ASSISTED AUDIT
TECHNIQUES
JASON LO

2. Introduction
 XBRL and it’s 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
 <Identification of element> <accounting policy> AMOUNT </policy>
</element>
 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