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Data Level Assurance:
Bringing Data Into
Continuous Audit Using
XML Derivatives
(Such as XBRL Classic and GL)
Fifth Continuous Assurance Symposium
Rutgers Business School
Newark, NJ
23-11-2002
Eric E. Cohen Chair, XBRL US
PwC
©2001 PricewaterhouseCoopers. PricewaterhouseCoopers refers to the individual member firms of the world-wide PricewaterhouseCoopers organisation. All rights reserved.
Agenda
•XBRL Tokyo – Increasing Transparency to Financial Markets
•Data level assurance
•Drivers
•From documents to data
•XML derivatives: lifeline for data level assurance
•XML
•XBRL
•XML web services
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XBRL Tokyo – Banking Focus
Banking crisis
Origami Bank – folded
Sumo Bank – belly up
Bonsai Bank – cutting back branches
Karaoke Bank – up for sale, going for a song
Kamikaze Bank – nose-dived
Karate Bank – 500 jobs chopped
Sushi Bank – something fishy going on; staff getting a raw deal
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Data Level Assurance
Atomic Information: Assurance need, opportunity or
impossibility?
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Drivers For Data
•Corporate malfeasance.
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Drivers For Data
•New reporting model and demand
•Atomic information on web site, in press releases
•Demand for material disclosure items outside of periodic report
• In my view, we need to supplement the static periodic disclosure model that has long served investors well, but in today's world results in the
delivery of information that is often stale upon arrival, and impenetrable
to many of those who receive it. I believe we need to move toward a
dynamic model of current disclosure of unquestionably material
information.
– http://www.sec.gov/news/speech/spch523.htm
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Paper-paradigm Report → e-Document
All e-documents
Underlying transactions
GL detail
Management
Pre-disclosed
HowPresent
do I know
FS is actually
that the file
data
what it is summaries
represented to be?
Mp3, mpeg, tif, etc.
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E-Document → e-Data
Presentation
Tagging
Summarization
Allocations
Reclassification
Accounting
Trx
Do tags
match
presentation?
Does tags’
content match
detail?
Controls
surrounding
taxonomies,
linkbases
Recognition
Is file/stream
authentic and
authorized?
Encapsulation
Is all
necessary content and
context included? PricewaterhouseCoopers
Tag, You’re It! e-Document → e-Data
•Looking at data items individually
• Press release with Sales figures
• Are those figures “real”?
•Example: NASDAQ Pilot (www.nasdaq.com/xbrl)
• More usable data will be … used! Assurance …
•Necessary (?) contextual information
• Obvious: unit of measure, time period
• What is inventory without valuation method?
• What is PPE without knowledge of going concern?
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From Documents To Data
•Documents become data
• How many files in a web page? How many files in XBRL instances?
• Not analog but digital
• Not strictly freeform, but standardized (tags)
– Additional information
• Assurance not only on the sum of the parts but the parts themselves
•Recognizes risk/reward of disclosure/assurance
•Forget “fairly presented”, “taken as a whole”, materiality
•And with CA, forget subsequent events
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What Is Data Level Assurance?
New statements providing variable comfort that
• Appropriate authorization and authentication is assured
• Reader has necessary context for understanding data item(s)
• No obvious inconsistencies between tags and textual items (machine
and human readable identification) exists
• Content of tag and tag of content make sense
• Appropriate controls between instances and referred-to schemas are
in place
And technology that makes that assurance portable after transformation
of the original data item
Vasarhelyi and Cohen, draft definition as of November 5, 2001
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What Is Data Level Assurance?
•NOT necessarily assurance on the underlying supportive data
•NOT necessarily assurance on the underlying systems
•NOT necessarily something the profession is jumping to embrace
•NOT necessarily something we will be able to easily explain to
the marketplace and manage expectations
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Nature of Assurance
•In data level assurance, redefined
– Analytical review
– Substantive testing
– Data level testing
– Internal control evaluation
– A new model of risk assessment
– Materiality as a threshold of error
– Tradeoffs of costs and assurance obtained
– Collecting and weighting of evidence
– Subsequent events
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Data Level Assurance
Atomic Information: Assurance need, opportunity or
impossibility?
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Role Of XML Derivatives
•Cross-platform, application independent document/data format
• XML
• Common vocabulary/vocabularies
• XBRL et al.
•XML-based programming equalizer and exposure tool
• XML Web Services
•Standardized query capability
• ???
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XML, Content & Context: Mercury
Hg
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XML Alone Doesn’t Solve Problem
qbxml
qbxml
smbxml
smbxml
Intacct xml
Intacct xml
SAP
SAP
Peoplesoft
xml
Peoplesoft
xml
Oracle
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Shared Vocabularies Bring Efficiencies
qbxml
qbxml
smbxml
smbxml
SAP
Peoplesoft
xml
XBRL GL
Intacct xml
Intacct xml
SAP
Peoplesoft
xml
Oracle
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XML Applied To Reporting: XBRL
Today over 10,000 US public
companies release financial results
quarterly…
But the contents are not organized.
The data must be reentered into
computer applications for
interpretation.
What if financial documents included
both content ($75,453)
and structure
($75,453=net income for Q1/2001)?
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XBRL
A proposed industry standard for the publishing, exchange
and analysis of financial and business reports and data.
 Information is entered only once using an Internet-based tool for
preparing and publishing all financial and business documents with
automatic conversion to various formats
 Information may be reliably extracted and analyzed across companies
with no manual intervention
 Supports current and emerging accounting standards
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Overall World of XBRL
XBRL GL
XBRL “Classic”
Data
Concepts
“View” of data
Internal
External
Future
GAAP
Special
Industry
Reports
Regulatory
Filings
Performance
Metrics
GAAP
Tax
Reporting
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XBRL GL: “Generic Ledger”
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Bridging eBusiness and Reporting
Tax
Regulators Investors
Creditors
Lenders Website
Aggregators
One
way
One
way
XBRL
BUSINESS
BUSINESS
REPORTING
Intra system
2-way
ERP
G/L Packages
CRM
Detail to summary
XBRL GL
Taxonomy
Transaction
Creation
Detail Journal
Accounting
Mappings
recognition/
→
Rules
Spaceclassification
•Orders
•Orders
Customers
Suppliers Transaction
X12,
•A/P
•Delivery
EDIFACT,
•A/R
XML•Delivery
INITIATIVES
2-way
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Transaction Space
•Examples
• X12, UN/CEFACT Forum
• ebXML business vocabularies (?!), UBL
• MISMO, ACORD, HR-XML, RosettaNet, itd.
•Purpose
• Single-use, point to point
(e-)Business
X12, EDIFACT, XML INITIATIVES
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XBRL GL: Universal Audit Trail
•Purpose
• Machine to machine transfer
• Archival
• Consolidation
•Bigger than General Ledger
• ASQC/www.globalbestpractices.com/ABC/Process Based
Accounting
XBRL GL
Journal Taxonomy
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Uses Of XBRL GL
One Vocabulary
One Framework
Trial Balance
Accounting
System
Adjustments
Budget
CPA
Accounting
System
Chart of Accounts
Customers, Vendors, Employees
Accounting
System
A
Open AR, AP, Inventory Status
Journal Entries, Ledger History
Accounting
System
B
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Reconciliations: Accounts Receivable
4. XBRL US ci
accountsReceivableTradeNet.accountsReceivableTradeGross
US
GL
Continential
GL
US
AR
xbrlElement=“accountsReceivableTradeNet.accountsReceivableTradeGross”
xbrlTaxonomy=“{usgaap}”
3. XBRL GL entriesType=“balance”
summarized amounts in account, period in time
Do the entries in 2 or 3 map to
the total in 4??
Do the entries in 2 sum up to
the balances in 3?
Are all documents from 1.
reflected in the detailed entries
of 2.? (documentType=“invoice”,
or
2. XBRL GL entriesType=“entries”
represents individual detail of entries
1. XBRL GL: entriesType=“assets”
represents AR aging
etc.)
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Future Audit
Compare details with summaries
XSL
Branch
Systems
Sub-systems
Sub-systems
itd
post
GL
Transfer
Financial
Reporter
post
Financial
Reports
xbrl
Sub-systems
Rules-based monitoring, triggers and alarms
XML-based source
documents can be
stored in databases
and retrieved and
reported upon as
needed.
XML-based
universal audit trail
can represent
transactions AND
processes; archive
and query anytime.
XML-based
universal audit trail
provides drill-down
detail from
standardized
business reports.
XML data can be
from a file, a data
stream, or a web
service.
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Information for Data Assurance
Internal
External
Quantitative
Qualitative
Financial
Non-financial
Mandatory
Voluntary
Tracking “Transactions”
•Standard schemas for “transaction” trapping and understanding
• Processes
• Entries, Agents, Resources, Events
•Actuals, budgets
•Logs, alarms
•Data reliability? How much can you trust the underlying data
•
Reliability of cash: 99%
•
Reliability of accounts receivable: 95%
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Reliability
From my APICS days:
If inventory is 96% correct, and
If bills of material are 96% correct, and
If purchase order schedule is 92% correct, and
If manufacturing schedule is 90% correct, then
Almost 25% of production and purchasing decisions are wrong
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Hooking Into Client Systems
Embedded audit modules
• Proprietary
• Independence issues?
• Internal audit
CORBA
XML Web services
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Hooking to Outside Systems
•Benchmarking Information
• FedEx, UPS
• Google
• NASDAQ Pilot (www.nasdaq.com/xbrl)
• Data aggregators
•Third parties and Extranets
• Circularization
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XML Web Services
“Give me this year’s trial balance
and the details for Officer’s Comp,
Maintenance and Repairs, and
prepaid taxes.”
“Help me understand how to get the
XBRL data from your web service.”
“Create an XBRL export file for me
please, or let me know how to tap
into the XBRL data stream.”
Current
filled
Generic
DataGAP
Query:
???
proprietary
Genericby
Discovery,
Access: WS
mappings
Shared
Vocabulary: XBRL
Data Format: XML
Audit
Tool
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