How Will Continuous Auditing and XBRL-GL Work Together

to Provide Improved Business Value?

Nigel J. R. Matthews, BASc, CAACL Services Ltd.

XBRL Comes of Age

There are many pervasive [information] supply chain problems that exist today due to the lack of an open information standard and

proprietary formats….XBRL enhances the work of internal auditors by addressing these information problems and enabling

them to do more at a lower cost.

Mike WillisPricewaterhouseCoopers

Internal Auditor Magazine, October 2007

TimelineAudit Software

XBRL

1990s

XML 1.0 becomes W3C recommendation

XBRL Reporting Schema 2.1

Mainframe based query and reporting tools

Creation of PC spreadsheets

Introduction of purpose-built Audit technologies

(CAATS) Continuous Controls Monitoring Applications

Re-emergence of Continuous Auditing

ACL ImportsComplex XML

ACL Imports XBRL reporting schema 2.1

XBRL 1.0

XBRL 2.0 Reporting Schema

XBRL-GL Schema 2.1 released

Audit AnalyticsServer Solutions

ACL imports simple XML data

20001980s

Why Continuous Auditing?

Provides the ability to: Notify the organization when errors that impact

financial performance have occurred Ensures adherence to internal policies and external

requirements to stakeholders Determines transaction validity, accuracy and

appropriateness on a transaction by transaction basis

The only audit approach that makes sense in the face of massive transaction volumes generated by today’s businesses.

The truth is in the transactions

Data Analysis, Monitoring andControl TypesThere are three types of controls within the enterprise:

1. Manual

2. Automated

3. Combination

Percent of Controls Covered

Automated Application

Settings (32%)

Manual(23%)

Combination(45%)Covered by transaction monitoring

Covered by IT/ System controls monitoring

Continuous Monitoring/Auditing Model

Controls & Compliance Rules

Historical and statistical transactional profiling

Transaction Monitoring

System Controls

Findings

Alerts

Financial & Business Unit Managers & Audit

Management & Audit ActionImmediate notification of critical exposures

Investigations, recoveries, and improved controls and procedures

Test transactional data against established internal controlrules (COSO-based) and transactional profiles

Data Data Data

Transactions detailed for further analysis

Transactional Data

Greatest Challengeis Data Access

ContinuousMonitoring/AuditingXBRL-GL

Benefits

General Ledger

Inventory

Receivables

Payables

Accurate financial reports for Investors, Regulators, and Management

The Goal is Effective Controls and Accurate Reporting Both continuous auditing and monitoring working

together in the organization

Testing system controls and financial transactions to ensure effective compliance with regulatory and internal controls

Create assurance that all the data flowing through the systems is accurate before being entered in the financial statements

Where ever possible use XBRL-GL formatted data as the mechanism to reliably consolidate & evaluate business transactions through the general ledger

XBRL Supports Continuous Compliance Assessments Today Continuous Auditing/Monitoring is a reality

but there are still challenges in the financial reporting supply chain

These challenges mean that extensive manual audit and reconciliation procedures are required

XBRL-GL can bridge that gap and make the roll-up of audited data into the financial statements a faster, more efficient process

Outcomes: less opportunity for errors, lessre-work, improved efficiency

XBRL-GL and The Auditor

XBRL-GL allows auditors to pull information from disparate systems in standardized format

Aim is achieve near real-time access to data and immediacy of relevant audited business information

Result is a simplified audit process that allows auditors to review more data in detail, more frequently

The auditor should evaluate the data not spend time on conversion issues

Continuous Auditing - Examples

Early Adopters

Case Study: HCA(Hospital Corporation of America) Recovering from previous high-profile

accounting scandal

Wanted to Continuously Audit transactions fromHR, payroll,suppliers and accounts payable

Found $17 million in duplicate payments inone year

Identified billing errors on 16,000 units of equipment

Reduced SOX 404 compliance costs

Success Story: Dollar Thrifty

Continuous Auditing of transactions providedimmediate ROI

Wanted to move beyond random sampling and gain full coverage of its 500,000 monthly transactions

Chose ACL solutions to assess risk and detect fraud saving over 10,000 hours of manual staff labor

Reduced commission expense by $750,000 annually and pinpointed cases of fraud