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Understanding User Perceptions of XBRL and Financial Audit Assurance

Explore the limited knowledge users have about XBRL and their perception of financial audit assurance, with insights on how XBRL can impact financial reporting.

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Understanding User Perceptions of XBRL and Financial Audit Assurance

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  1. XBRL, assurance & financial analysis • Chris Dreyer, CFA • WCOA 2006 monitoring iorp.eu

  2. Overview • Who are “users”? • What do they know (about XBRL)? • Do they care (about audits)? • Doing the sums • So? monitoring iorp.eu

  3. Who are users? monitoring iorp.eu

  4. What do they know? • Overall, very little • But those in the know like it • CFA Institute Member survey in March 2006 monitoring iorp.eu

  5. Do they care? • The market at large does not care deeply about audits - • As long as they are not limited! • Then it becomes a matter for specialists / litigators. • But specialists have a mind of their own about valuation. • Hence assurance is perceived to be binary. monitoring iorp.eu

  6. Doing the sums • Generally, if XBRL is disclosure neutral, then it should also be “audit neutral” at all levels: • statements • accounts • line items • There should be an assurance status tag to distinguish audited from not audited items. monitoring iorp.eu

  7. Doing the sums • Users will increasingly take individual items out of their contexts without seeing the context. • Users expect audited information to be of homogeneous quality throughout. • Reliable segment information will be a particular focus of XBRL based research. monitoring iorp.eu

  8. So? • XBRL will be a disruptive technology in financial reporting - if & when a majority of preparers adopt it. • Which I hope they will; with a little help from their regulators. • Sarbanes-Oxley’s procedural focus may have been just a few years too soon. monitoring iorp.eu

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