In Data Tagging, Auditors Feel Left Out

Institute of Internal Auditors will offer guidance on the role of audit executives in interactive filing.
Stephen TaubOctober 16, 2008

The Institute of Internal Auditors says it will release guidance on the role of audit executives in the new process of filing financial statements with interactive data.

The announcement by the IIA is in response to a survey conducted by which found that as data-tagged XBRL filing becomes a reality, internal auditors feel left out of the process. According to the survey of more than 200 chief audit executives worldwide, more than half are not yet familiar with XBRL, which stands for eXtensible business reporting language.

In fact, more than 90 percent said they are interested in guidance on internal auditing’s involvement in the new process of filing financial statements with interactive data.

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In response, the IIA Research Foundation said it will release guidance on this topic in January 2009.

“It’s the responsibility of the company’s management to ensure that accurate and complete financial statements are filed in XBRL format,” said Lily Bi, the IIA’s director of technology practices “But internal auditors can help implement XBRL and provide objective assurance on the implementation process. 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.”

The survey found they have a lot of work to do to get up to speed. More than half of internal auditors responding to the survey (51 percent) said they don’t have any XBRL knowledge at all, while 42 percent said they only know the very basics. One possible reason: Just 8 percent of respondents said that their companies are currently filing financial reports in XBRL format.

However, more than 37 percent said that this will happen in the next three years.

And even if the companies do file financial statements in XBRL, internal auditors are not involved. Among the 29 respondents who indicated their companies file in XBRL, only four said they played some role.

Meanwhile, none of the respondents said that XBRL was being used in the company’s internal processes other than financial reporting.

“The business report supply chain starts from initial transactions, moving to internal consolidation and reporting, and then to external financial reporting,” said Bi. “Due to the urgency of compliance with regulators’ mandates, many organizations use XBRL at the end point of this supply chain. But XBRL as an interactive business reporting language can be used throughout various stages of an organization’s business report supply chain. 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.”