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5th University of Kansas International Conference on XBRL Transparency, Assurance, and Analysis Revamping the Audit Approach using Accounting Equations: Processing XBRL-tagged Data in an XBRL-tagged Top-cycle Philip Elsas, ComputationalAuditing.com Paul Klint, CWI.nl Trevor Stewart, Deloitte & Touche Rajendra Srivastava, University of Kansas Hans Blokdijk, Limperg Institute Miklos Vasarhelyi, Rutgers UniversityOverland Park, Kansas April 28-30, 2011

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2Top-cycle as Model for XBRL Assurance ComputationalAuditing.com

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3Why a model for XBRL assurance?• To avoid a too complicated and too flexible language• Model-based closure around XBRL assurance language• Top-cycle auditing model guides design of Domain-Specific Language (DSL) for XBRL assurance• Tagging framework for both data and operators• Model-driven auditing for real-time trust ComputationalAuditing.com

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4 Wholesale Trading Enterprise, Elementary Top-cycle ModelAccRec: AccRec[B] + SP * Sales – AccRec[E] → CashRcptInv: Inv[B] + Pur – Inv[E] → SalesAccPay: AccPay[E] + CashDisb – AccPay[B] → PP * PurCash: Cash[B] + ColVAT + CashRcpt – PayVAT – Cash[E] → CashDisbVAT: VAT[E] + VPP * Pur + PayVAT – VSP * Sales – VAT[B] → ColVAT ComputationalAuditing.com

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Top-cycle model as Diagram 5 ComputationalAuditing.com

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6 Top-cycle model as MatrixComputationalAuditing.com

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7Revamped Audit Approach: 5 phases“Next Generation Auditing: Data-Assurance as a Service”1. Mine ‘As Is’, actual top-cycle process model2. Identify ‘To Be’, normative top-cycle3. Continuous Auditing: continuous confrontation to norm4. Dempster-Shafer-Srivastava method for aggregation5. Publish deviation top-10 on interactive dashboard ComputationalAuditing.com

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8Phase 1:Process Mining ComputationalAuditing.com

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Phase 2: Identify norm in ‘As Is’ 9 A B D C ComputationalAuditing.com

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Phase 2: Resulting in normative top-cycle 10 ComputationalAuditing.com

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Revamped Audit Approach: applying 11XBRL tagged data & operators in all 5 phases Topcycle-embedded Audit Assertions XBRL US GAAP Taxonomy ComputationalAuditing.com

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12 Design & Development of a Domain-Specific Language for AuditingA software engineers view:● DSL captures domain knowledge● DSL leads to 10-50x increase in software productivity

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Domain Knowledge 13 Auditor: 20 words for debtInuit: 20 words for snow Th. Limperg Anon. Inuit Woman Words capture essential domain knowledge: describe them in feature model/ontology/... and use as basis for DSL design

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14 DSL realization Use meta-programming to Use meta-programming to compile DSL to (Java-based)Design of Design of compile DSL to (Java-based) service implementations service implementationsauditing DSL auditing DSL DSL DSL Compiler Compiler Implements (See rascalmpl.org) Software services for Software services for mining/checking/ mining/checking/ visualization/... visualization/...

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Scoping our DSL 15● XBRL Formula ● Continuity equations● XBRL ontologies ● Audit planning● Process mining questionnaires● Dempster- ● Reporting with Shafer-Srivastava drill down Lets bring the benefits of a DSL Lets bring the benefits of a DSL to the auditing domain and profit from to the auditing domain and profit from the power of meta-programming the power of meta-programming languages like Rascal languages like Rascal

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Invitation to team up on R&D projects 16 What’s in it for an audit firm? • Avoid overlapping investments • ROI: ensure connecting R&D and relevant know how What to bring to the table? • Proposal on pilot studies • Client accompanying you in pilots • Time commitment of audit expert Top 3 proposals are rewarded with team-up connecting to your audit practice ComputationalAuditing.com

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Golden opportunity for Ernst & Young 17 Extend E&Y CARAT project proposal on audit tools & techniques by inclusion of pilots on owner/franchisor oriented audit approach with E&Y audit clients: • McDonald’s - global franchisor-franchisee • Twinfield - no.1 in online accounting Build on successful project of Twinfield for McDonald’s http://www.vanoers.nl/Home/Diensten/Accountancy/Adviseurvoorfranchisenemers.aspx & include support of subcontractors in pilots: • Chris Nedza - CEO of ZeeZor, real-time relation franchisor-franchisee: revenue completeness • Anne Rozinat - Fluxicon, process mining ComputationalAuditing.com

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Current considerations 18Finalize as white paper for China’s Ministry of Finance,Accounting Regulatory Department - advised byFou-Khan Tsang, board member of SRA INAA: • China is on the outlook for alternative audit approach • Excellent appreciation of ownership orientation • Top-cycle concept has high yin-yang qualityIndia – current EY CARAT collaboration is springboardNetherlands – establishing platform for internationalizingproven Equational Audit Approach: integrated approachfor owner-ordered and management-ordered auditing ComputationalAuditing.com

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19 Your questions,or advisory commentsPhilipElsas@ComputationalAuditing.com ComputationalAuditing.com