Assurance on XBRL Instance Documents:
Assurance on XBRL Instance Documents:
The Case of United Technologies CorporationThe Case of United Technologies Corporation
University of Waterloo
Efrim BoritzWon Gyun No
UWCISA - 5th Symposium on Information Systems AssuranceOctober 12, 2007
IntroductionIntroduction
XBRL and Assurance
SEC’s Voluntary XBRL Filling
Reporting Framework for Electronic Filings
Assurance Framework for Electronic
Business Reporting
Findings
Recommendations
AgendaAgenda
Increased XBRL implementation for regulatory filings across the world.Increased XBRL implementation for regulatory filings across the world. U.S.: SEC U.S.: SEC XBRL voluntary program on EDGAR XBRL voluntary program on EDGAR and $5.5M to XBRL-US to develop and $5.5M to XBRL-US to develop
taxonomies.taxonomies.
U.K.: Plans to make XBRL mandatory for company tax filings from 2010.U.K.: Plans to make XBRL mandatory for company tax filings from 2010.
Canada: CSA XBRL voluntary filing program on January 19, 2007.Canada: CSA XBRL voluntary filing program on January 19, 2007.
Japan: Japan: TSE XBRL reporting system in 2006.TSE XBRL reporting system in 2006.
XBRL 3rd in FEI’s top 10 financial reporting challenges for 2007(Heffes, 2007).
Most companies currently providing their information using XBRL are doing so
without assurance.
Very limited guidance and experience on XBRL instance document
preparation
SEC’s voluntary XBRL filing program Some errors in SEC filings
Case study of the EDGAR filing of United Technologies Corporation
Perform mock audit procedures
Interview preparers and auditors
Address a number of issues that an auditor might confront if/when provides assurance on
XBRL instance document
IntroductionIntroduction
Phase I - Paper Paradigm Electronic Financial Reporting (Past)
Phase II - Paper Paradigm Electronic Financial Reporting Using XBRL (Current)
Phase III - XBRL Paradigm Financial Reporting (Future)
XBRL and AssuranceXBRL and AssuranceThree Phases in Electronic Financial ReportingThree Phases in Electronic Financial Reporting
SEC’s voluntary XBRL filing on EDGARSEC’s voluntary XBRL filing on EDGAR
February 3, 2005February 3, 2005
File paper format and furnish XBRL format statementsFile paper format and furnish XBRL format statements
MD&A, notes, and accountant’s report are optional.
Companies create customized taxonomies to enable the XBRL filing to
parallel the paper format filing as closely as possible.
Some insights into SEC filings (at February 28, 2007)
36 companies and total 126 fillings
Significant parts of the filed instance documents are based on companies’
own customized taxonomy extensions.
Instance Validation: 51 (49.5%)
Taxonomy Validation: 114 (90.5%)
Financial Reporting Instance Standards (FRIS) and Financial Reporting
Taxonomies Architecture (FRTA)
SEC’s Voluntary XBRL SEC’s Voluntary XBRL FillingFilling
Compare the XBRL instance document in detail to the paper format Compare the XBRL instance document in detail to the paper format
filingfiling
Interview preparer to obtain explanations
To identify issues that an auditor might confront if performing audit
procedures on an XBRL instance document
To learn about and report on the nature and extent of the work that
would be required to determine whether the translation of the
paper format document to the XBRL document was complete and
accurate
To provide recommendations for both auditors and XBRL instance
document preparers
Research ObjectivesResearch Objectives
Client Acceptance
Planning
Testing & Evidence
Evaluation & Reporting
Assurance Framework for Assurance Framework for Electronic Business ReportingElectronic Business Reporting
1. Acceptance
8. Using the work of an expert
9. Management representations
2. Terms of engagement
7. Obtaining evidence
10. Reporting
From Assurance Working Group of XBRL International (2006)INTERACTIVE DATA: THE IMPACT ON ASSURANCE, NEW CHALLENGES FOR THE AUDIT PROFESSION
From Hayes, R., Dassen, R., Schilder, A., & Wallage, P. (2005)Principles of Auditing: An Introduction to International Standards on Auditing
3. Planning the engagement: Understanding the subject matter
4. Assessing the appropriateness of the subject matter
5. Assessing the suitability of the criteria
6. Risk and Materiality
Audit ProcessAudit ProcessAA Cross-reference Between PCAOB and AWG Cross-reference Between PCAOB and AWG
Audit ProcessAudit ProcessManual Two-way Tracing: Step IManual Two-way Tracing: Step I
ContextsContexts
Audit ProcessAudit ProcessManual Two-way Tracing: Step IIManual Two-way Tracing: Step II
Financial Facts and XBRL ElementsFinancial Facts and XBRL Elements
Audit ProcessAudit ProcessManual Two-way Tracing: Step IIIManual Two-way Tracing: Step III
Notes and MD&ANotes and MD&A
Found that only “Found that only “44.3%44.3%” of the 10-Q instance document was based ” of the 10-Q instance document was based
on the on the approved XBRL taxonomiesapproved XBRL taxonomies..
Could not determine whether this use of custom extensions is
appropriate due to the lack of assurance standards or practices with
respect to this matter.
A custom taxonomy was used instead of the approved XBRL
taxonomy that was available.
Accountants Information – Name
<AccountantsInformationName> vs. <AccountantName>
Used different elements for the same names, signatures, job titles,
and date contained in different exhibits
James E. Geisler and Gregory J. Hayes in the signature section of UTX’s 10-Q
were not used in the section 1350 certifications. Instead different taxonomy
elements were used.
FindingsFindingsTaxonomyTaxonomy
ContextsContexts
145 contexts145 contexts
Not in any logical orderNot in any logical order
Could cause problems in subsequent periods to determine inter-period
consistency (e.g., quarter to quarter)
Labels
Titles and subtitles were not always presented in the instance document in a
consistent manner, or were missing altogether.
Some labels were missing or not exactly the same in the label linkbase as in
the taxonomy.
Totals
Some totals which appear in the notes in the 10-Q are omitted in the instance
document.
Sometimes totals are in the instance document and sometimes they are left
as implicit items defined in the calculation linkbase.
FindingsFindingsInstance DocumentInstance Document
Textual Narratives
Disaggregation of textual narratives in both notes and Disaggregation of textual narratives in both notes and
MD&AMD&A
<usfr-pte:CommitmentsContingenciesNote>
<usfr-pte:ContingenciesContingentLitigationEnvironmental>
<usfr-pte:ContingenciesContingentLitigationGovernmentInvestigations>
<usfr-pte:ContingenciesContingentLitigation>
XBRL Elements
FindingsFindingsNotes and MD&ANotes and MD&A
FindingsFindingsAccountant’s Report Regarding XBRL EngagementAccountant’s Report Regarding XBRL Engagement
Used Used own taxonomy own taxonomy for ‘Report of Independent Registered for ‘Report of Independent Registered
Public Accounting Firm’ Public Accounting Firm’ instead of using usfr-ar instead of using usfr-ar (US (US
Financial Reporting - Accountants Report) taxonomy.Financial Reporting - Accountants Report) taxonomy.
FindingsFindingsAccountant’s ReportAccountant’s Report
AWG (2006, p. 24): 9 basic elements should be included in the report.AWG (2006, p. 24): 9 basic elements should be included in the report.
PCAOB (2005, p. 6)PCAOB (2005, p. 6)
An audit report: if the XBRL instance document has been audited.
A review report: if it was reviewed and the report was filed with the SEC.
Do not express opinion: if it was reviewed, but the review report was not filed
with the SEC.
Disclaim an opinion: if it was not covered by an audit report or review report.
The AWG’s recommended elements were satisfactorily addressed in
the report.
PWC stated that the underlying information in the 10-Q instance
document has not been audited and did not express an opinion on
that information in the report since the review report prepared by
PWC was not filed with the SEC.
The accountant’s opinion on the instance document was created in
HTML format rather than XBRL and was filed as a separate document.
FindingsFindingsAccountant’s Report Regarding XBRL EngagementAccountant’s Report Regarding XBRL Engagement
Took an XBRL expert about Took an XBRL expert about 63 hours 63 hours to complete (not to complete (not
counting other steps that would be required)counting other steps that would be required)
Had high assurance high assurance that the instance document was a
complete and accurate reflection of UTX’s 10-Q paper format
filing
Cannot form a conclusion on the fairness ...in accordance
with GAAP of the instance document
No assurance standards or guidelines for making such an
assessment
Limited knowledge for evaluating the MD&A, regulatory
information, and the appropriateness of the company’s own
extensions to the XBRL taxonomies
FindingsFindingsSummarySummary
Auditors’ effort, time, and cost could be reduced.Auditors’ effort, time, and cost could be reduced.
A deliberate A deliberate structuringstructuring of an XBRL instance document of an XBRL instance document
A A logical ordering logical ordering of elements in the XBRL instance document (e.g., by financial of elements in the XBRL instance document (e.g., by financial
statement, notes, and MD&A)statement, notes, and MD&A)
An embedded description of the structure
Explanation of why custom taxonomies are required or are preferred to approved
taxonomies.
Create rules for naming attributes (Sgt_Ottis_2004 vs. Context11)
Organize contexts systematically and document rules used to create them
Need Computer-Assisted Audit Techniques
Assurance on XBRL instance documents.
Some form of comfort/assurance will be necessary.
Need guidance for both preparers and auditors
If an external report is provided, then it should be provided as an XBRL instance
document to utilize the advantage of XBRL
Need a taxonomy for an auditor's assurance report on XBRL instance
RecommendationsRecommendations
Questions & SuggestionsQuestions & Suggestions