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Presentation made in "International Virtual Conference: The New Paradigm for IFRS financial reporting business", organized by the Ibero-American Network of Virtual Studio on Nov 22 & 23, 2012

Presentation made in "International Virtual Conference: The New Paradigm for IFRS financial reporting business", organized by the Ibero-American Network of Virtual Studio on Nov 22 & 23, 2012

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Xbrl assurance Xbrl assurance Presentation Transcript

  • XBRL & Financial Reporting Risks in XBRL Environment Internal Controls Assurance over XBRL Instance Document Q&A2012 © NextGen Knowledge Solutions Private Ltd. 2
  • 2012 © NextGen Knowledge Solutions Private Ltd. 3
  • The computer language for the electronic communication of internal and external business report information International supply chain standardization effort backed by over 1000+ being adopted Balance Sheet March 31, 2012 March 31, 2011 by regulators/companies across the world (Audited) (Rs.) (Rs.) Inventories 6,12,962 5,57,111 Cross-platform, software-agonistic, Internet-friendly global standard based on Trade Receivables 4,49,173 3,77,347 XML (eXtensible Mark-up Language) Improves data accuracy by reducing manual efforts and subjectivity Available to all type of business <in-gaap:Inventories =”contextRef=I2012” unitRef =“INR” decimal=“0”>6,12,962<in- information: Financial, Non-financial, rules, gaap:Inventories> formulas, summarized, detailed2012 © NextGen Knowledge Solutions Private Ltd. 4
  • Balance Sheet March 31, 2012 March 31, 2011 (Audited) (Rs. in Thousands) (Rs. in Thousands) Inventories 612 557 Trade Receivables 449 377 Numeric Unit Precision INR Thousands Time Period Accounting Standard March 31, 2012 Indian GAAP Label Accounting Concept Indian GAAP Inventories Inventories Taxonomy Commercial & Industrial <in-gaap: Inventories contextRef=I2012” unitRef =“INR” decimal=“-3”>612000<in-gaap: Inventories>2012 © NextGen Knowledge Solutions Private Ltd. 5
  • From Traditional Financial Reporting Process Mapping • Identify base taxonomy. • Map financial facts to XBRL elements. • Identify financials facts that do not match to base taxonomy elements. Tagging • Create an instance document by:  associating the fact values being reported in a given filing with specific elements in the taxonomies.  defining periods, units of measures, and other aspects specific to that report. Reviewing  Validate the instance document against the regulatory requirements.  Rendering the instance document.2012 © NextGen Knowledge Solutions Private Ltd. 6
  • 2012 © NextGen Knowledge Solutions Private Ltd. 7
  • 2012 © NextGen Knowledge Solutions Private Ltd. 8
  • 2012 © NextGen Knowledge Solutions Private Ltd. 9
  • Traditional Format XBRL Format Human Readable Machine Readable2012 © NextGen Knowledge Solutions Private Ltd. 10
  • Potential to replace traditional format and electronic version (PDF & HTML) of financial statements Attestation of financial statements doesn’t apply to XBRL Reports Misconception about XBRL Auditor’s Conservatism XBRL is a new risk Challenges in audit of XBRL: Resources, Software & Standards2012 © NextGen Knowledge Solutions Private Ltd. 11
  • Audit and Examination Engagements - Reasonable Reliance Review Engagements – Limited Reliance Agreed-upon-procedures (AUP) – No Reliance2012 © NextGen Knowledge Solutions Private Ltd. 12
  • AICPA – "Performing Agreed Upon Procedures Engagements That Address The Completeness, Accuracy, or Consistency of XBRL Tagged Data“ AICPA – “Principles and Criteria for XBRL Formatted Information” ICAEW – "Guidance For Performing Agreed Upon Procedures That Address XBRL Tagged Data Included Within Financial Statements Prepared in iXBRL Format" JICPA – "Agreed Upon Procedures Engagements of XBRL Data" ICAI – "Guidance Note on Certification of XBRL Financial Statements"2012 © NextGen Knowledge Solutions Private Ltd. 13
  • 2012 © NextGen Knowledge Solutions Private Ltd. 14
  • Information on Identity of reporting entity Nature of financial data Information on reporting period Currency Precision or Scaling Segment information2012 © NextGen Knowledge Solutions Private Ltd. 15
  • Technical reference information Base reference information XBRL Validation Selection of wrong tags Reporting wrong data Failing to mark-up a concept2012 © NextGen Knowledge Solutions Private Ltd. 16
  • Closed taxonomy risks Accuracy of data Alterations in taxonomy Taxonomy version2012 © NextGen Knowledge Solutions Private Ltd. 17
  • Open taxonomy risks Duplicate taxonomy element Taxonomy elements not making true representation Misleading Labels Extensions not compliant with XBRL specifications Prohibited names2012 © NextGen Knowledge Solutions Private Ltd. 18
  • 2012 © NextGen Knowledge Solutions Private Ltd. 19
  • Source : ISACA, COBIT 4.1, USA, 20072012 © NextGen Knowledge Solutions Private Ltd. 20
  • - Identification of base taxonomy Completeness Mapping - Mapping of facts with taxonomy elements - Mapping of facts with residuary tags - Defining Contexts Tagging - Associating fact values with specific taxonomy elements - Validation for Technical Specifications Reviewing - Validation on regulator’s Validation Tool - Rendering2012 © NextGen Knowledge Solutions Private Ltd. 21
  • 2012 © NextGen Knowledge Solutions Private Ltd. 22
  • Completeness Structure Mapping Accuracy Source : ICAI Guidance Note2012 © NextGen Knowledge Solutions Private Ltd. 23
  • All required information & data as required by the entity’s reporting Completeness requirement is formatted in the XBRL Instance Document & is complete in all respect All facts that are required to be formatted are formatted Mapping of facts or presentation or calculation relationships in source Existence documents Solution Requirements Other required information Accuracy Structure2012 © NextGen Knowledge Solutions Private Ltd. 24
  • Solution The elements Viz. : line items, domain members & axis selected in Completeness Mapping Requirements the XBRL file are consistent with the associated concepts in the source document Taxonomy referenced in the Instance document is correct Mapping Attributes are consistent with source information Element Selected element is consistent with the concept in source information Most specific element is used for Other required information Same element is used for facts appearing multiple times Same element is used for each period New element is created only when no suitable element exist in taxonomy Structure2012 © NextGen Knowledge Solutions Private Ltd. 25
  • The amount, date & other attributes e.g. monetary units are Completeness Accuracy consistent with the source information Contextual information is consistent with the source information - Reporting Period Mapping - Decimal Values - Units - Entity Identifier Formatted amounts have appropriate sign Rendered text block information is consistent with source information Structure2012 © NextGen Knowledge Solutions Private Ltd. 26
  • The amount, date & other attributes e.g. monetary units are Completeness Accuracy consistent with the source information Labels are consistent with the captions in the source information Mapping Calculations reflected in the source information are included in Calculation Linkbase All formatted data is consistent with the underlying source information Extension elements for accounting concepts with debit or credit balance include balance attribute Structure2012 © NextGen Knowledge Solutions Private Ltd. 27
  • The amount, date & other attributes e.g. monetary units are Completeness Accuracy consistent with the source information Extension elements for currency amounts for non-accounting concepts Mapping :- include (i) a debit or credit balance attribute; or (ii) a documentation label for meaning of positive or negative value Structure2012 © NextGen Knowledge Solutions Private Ltd. 28
  • XBRL files are structured in accordance with the requirements of Completeness Structure the entity’s reporting environment All information is organized using required presentation groupings Entity Identifier & Scheme for each context is identical Instance document should pass Validation Test on regulator’s Validation Tool e.g. MCA Validation Tool New Table structure are only created when no suitable table structure exists in standard taxonomy Name of extension elements do not contain prohibited information2012 © NextGen Knowledge Solutions Private Ltd. 29
  • Practitioners Independence Management Assertions Agreement on Procedures Responsibility for sufficiency of procedures Criteria for determination of findings Evidential matter Materiality limit Restriction on use of report2012 © NextGen Knowledge Solutions Private Ltd. 30
  • 2012 © NextGen Knowledge Solutions Private Ltd. 31
  • 2012 © NextGen Knowledge Solutions Private Ltd. 32
  • "The focal point of XBRL Assurance is the evaluation of the accuracy and validity of the XBRL tags applied to the line items in the financial statements of reporting entity. In order to perform these evaluation, the auditor needs to have the knowledge of what constitutes an error, what is the risk in XBRL Instance document, how control tests & substantive tests should be applied in XBRL environment and how materiality should be conceived and applied to XBRL Instance document."2012 © NextGen Knowledge Solutions Private Ltd. 33
  • “No matter how complex things are, basically everything is simple.”2012 © NextGen Knowledge Solutions Private Ltd. 34
  • 2012 © NextGen Knowledge Solutions Private Ltd. 35
  • NextGen Knowledge Solutions Private Ltd. Vinod Kashyap vinod.kashyap@nextgenknowledge.com http://www.nextgenknowledge.com