The hype around the US Securities and Exchange Commission (SEC)
release of an eXtensible Business Reporting Language (XBRL) roadmap
is having minimal effects on local auditors, according to two US
mid-tier firms.
The SEC announced late last year that domestic and foreign large
accelerated filers will have to submit their financial statements
in XBRL from 2009 after the commission approved a final rule change
to introduce the interactive tagging requirement.
The new rules for SEC filings will be phased in over three years
beginning with fiscal periods ending on or after 15 June 2009.
The three year plan to roll-out XBRL will have a negligible
impact on BDO Seidman according to Jeff Lenz, a partner in the
firm’s national SEC department, because initially auditors will not
be required to provide assurance over the XBRL filings.
“I suppose some people will have the view that the investment
community will like it better if there is some sort of auditor
requirement but I wouldn’t expect an overwhelming demand for that,”
Lenz said.
RSM McGladrey’s international assurance services group partner
Bob Dohrer said the firm welcomed the XBRL roll-out.
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By GlobalDataHowever, he agreed revenue generated from XBRL will be minimal
until the SEC makes a decision to require assurance over these
filings.
Limited understanding
A survey of more than 200 chief audit executives worldwide by
the US-based Institute of Internal Auditors (IIA) in October last
year, which found 51 percent of respondents didn’t have any
knowledge of XBRL and 42 percent only knew the very basics.
XBRL tags will allow individual items to be uniquely identified
in companies’ financial statements so they can be easily searched
online, downloaded into spreadsheets, reorganised in databases and
used for other comparative and analytical uses.
Lenz and Dohrer said their clients are either completing the
XBRL tagging themselves or being assisted by specialist XBRL
tagging companies.
Lenz also downplayed the costs involved with the introduction of
the tagging system and said comparisons between the costs required
to implement XBRL and Section 404 of the 2002 Sarbanes-Oxley Act
were “vastly overstated”.
“Some people have compared [XBRL] to implementing Section 404,
which requires reporting on internal controls. We don’t see this as
remotely close to that in terms of cost,” he said. “I couldn’t
quote a number on audit fees from 404 but I would say it is a
significant number and I think the fee revenue we will get from
XBRL will be a trivial number.”
Dohrer predicted requiring auditor assurance of XBRL filings
would be at least five years away.
“If we look into the future one can only imagine that the
current EDGAR [Electronic Data Gathering, Analysis and Retrieval]
filings will be replaced by the XBRL filings and at that point
audit firms are certainly going to be asked to provide some
assurance around that XBRL process,” he said.
A question of assurance
Dohrer said there will be a lot of questions around what kind of
assurance auditors will be asked to provide.
“When we issue our audit opinion it is on the financial
statements as a whole. There’s a significant question around when
users of that information pull out just the domestic trade
receivables number; how is the assurance around that number going
to be communicated in a virtual world?” he said.
Nicholas Moody
TIMELINE
SEC’s XBRL roadmap
Phase one: Domestic and foreign large
accelerated filers that use US GAAP and have a worldwide public
float above $5 billion required to file in XBRL from 15 June
2009.
Phase two: All other domestic and foreign large
accelerated filers using US GAAP required to file in XBRL from 15
June 2010.
Phase three: All remaining filers using US GAAP
and all foreign private issuers that prepare their financial
statements using IFRS as issued by the International Accounting
Standards Board required to file in XBRL from 15 June 2011.
