Internal Auditors Take on Expanding Strategic Role
Internal auditors say they want more information on XBRL. According to a survey of more than 200 Chief Audit Executives, conducted by the Institute of Internal Auditors (IIA), more than 50% of those polled are not yet familiar with XBRL. Nevertheless, many acknowledge that the reporting technology is a looming reality. In fact, nearly 40% agree that this will happen within three years. The IIA study also shows that as mandates of filing financial reports in interactive data format become a reality, internal auditors are seeking out their role in the conversion to XBRL, and the technology is a tool they can develop along strategic lines.
New concepts like XBRL and enhanced business reporting are making real changes in the way business is being done. These major financial reporting developments are critical issues facing financial, legal, risk, audit and compliance officers at publicly held companies. Right now, corporations must add the infrastructure and strive to meet the filing requirements of the SEC. As a result, executive search firm, A.E. Feldman, reports that accounting jobs are opening up for Audit Managers and senior-level professionals with expertise in the preparation and maintenance of financial, accounting and statistical reports.
XBRL Transforming Global Business
XBRL, also known as eXtensible Business Reporting Language, is a language for the electronic communication of business and financial data which is transforming global business reporting with the promise of greater efficiency and improved accuracy. This technology involves computer “tags” similar to the bar codes used to identify groceries in the supermarket. According to the SEC, the tags uniquely identify individual items in a company’s financial statement so they can be easily searched, downloaded, reorganized, and put to any number of other comparative and analytical uses.
The technology is being developed by an international non-profit consortium of approximately 450 major companies, organizations and government agencies, according to XBRL.org. Right now, implementations of XBRL are growing rapidly around the world.
The SEC has called for companies that file using U.S. GAAP and have a worldwide public float over $5 billion to provide XBRL-formatted financial statements beginning with fiscal periods ending December 15, 2008, according to AccountingWeb.com. The report adds that the remaining companies using U.S. GAAP will be phased into the XBRL program over the course of the next two years.
Additional mandates have also been established in a number of countries, including Canada, Australia, Belgium, China, Denmark, Japan, France, Netherlands, Singapore, and United Kingdom.
Internal Auditors: XBRL Looming
The XBRL mandates are making Chief Audit Executives take notice. “Although XBRL computer language for business reporting has been around for more than a decade, it’s likely that companies have recently paid attention to it because of the new mandates,” according to IIA Director of Technology Practices Lily Bi.
More than half of the internal auditors polled by the IIA, 51%, say they don’t have any XBRL knowledge at all, while 42% are only familiar with the very basics. Furthermore, while only 8% of respondents said their companies are currently filing financial reports in XBRL format, more than 37% say this will happen within the next three years. That could be one reason why 90% of those polled by the IIA say they need more guidance on XBRL.
Internal auditing is designed to help organizations achieve objectives and improve operations by evaluating and improving the effectiveness of risk management, control, and governance, therefore the conversion of financial reporting to XBRL will have an inevitable impact on the internal audit profession, according to The IIA.
“It’s the responsibility of the company’s management to ensure that accurate and complete financial statements are filed in XBRL format. But internal auditors can help implement XBRL and provide objective assurance on the implementation process,” said Bi. “To do so, internal auditors need to first understand the new interactive reporting format, the mandate requirements, and pros and cons of various implementation approaches.”
“XBRL as an interactive business reporting language can be used throughout various stages of an organization’s business report supply chain,” adds Bi. “This will potentially give internal auditors great opportunities to access deeper business data, perform easier data analysis, improve profiling and risk assessments, and identify potential issues. And as an audit tool, interactive data will ultimately accelerate continuous auditing and monitoring.”
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