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XBRL: What’s In It For Internal Auditors Gianluca Garbellotto, Iphix June 25, 2009

19 th XBRL International Conference “Reducing Regulatory Burden With XBRL: A Catalyst For Better Reporting” June 22-25, 2009 Paris, France. XBRL: What’s In It For Internal Auditors Gianluca Garbellotto, Iphix June 25, 2009. Agenda. Why should internal auditors care

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XBRL: What’s In It For Internal Auditors Gianluca Garbellotto, Iphix June 25, 2009

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  1. 19th XBRL International Conference“Reducing Regulatory Burden With XBRL: A Catalyst For Better Reporting”June 22-25, 2009Paris, France XBRL: What’s In It For Internal Auditors Gianluca Garbellotto, Iphix June 25, 2009

  2. Agenda • Why should internal auditors care • Where – and how – XBRL is used • Intro to XBRL Global Ledger • XBRL for internal use • What does it all mean for internal audit • Resources • Q&A

  3. Why Should Internal Auditors Care • XBRL is here … or coming fast • The primary concentration: regulatory filings • Drivers for adoption include • Process efficiencies • Information transparency • Significant cost savings in data integration, dissemination and analysis • XBRL is more than filings, financials and compliance • The benefits above increase the deeper XBRL/data standardization is embedded

  4. Why Should Internal Auditors Care • Role in external filings • Under a bolt-on approach • Under an embedded approach • Internal transparency and efficiencies – today and tomorrow • Statistical vs. 100% testing • Centralized, consistent and application-independent validation, processing and visualization of data • New collaboration model with external auditors • M&A • The spectre of “real time”

  5. Regulatory Projects Israel, Spain, Italy and many more …

  6. Standard Business Reporting • On the basis of reduced compliance burden • Cross-government, business-to-government projects • Established in The Netherlands and Australia, official declarations of interest in New Zealand and UK, closely watched in many other countries • Based on long-term partnerships between Government and businesses – not on mandates • Not only - or even mainly - about financial statements • Significant cost savings for both sides • If your systems and processes are integrated, you may not have to report … until needed

  7. FFIEC/FDIC • Quarterly data collection from US banks, started in 2005 • Key point: validation at the source of data rather then at the consumption point • Substantial impact on processes, resources and costs • Errors in data received 68% => 5% • Processing time 45/60 days => 2 days • Human resources 1,000 => 200

  8. Intro to XBRL Global Ledger

  9. Accounting Software ERP systems UBL Rosettanet ACORD MISMO FPML Others SCOA/Trial balance AP/AR Ledgers General Ledger Fixed Assets, Inventory Documents/Entries Parties, entities KPIs – financial and not Others US GAAP IFRS SBR GRI G3 Statutory MD&A Transaction Layer XBRL Global Ledger XBRL External Reporting Business Reporting Supply Chain Business Operations Internal Business Reporting External Business Reporting Investment, Lending, Regulation Economic Policymaking Processes Crating the seamless interface Companies Financial Publishers and Data Aggregators Investors Central Banks Trading Partners Management Accountants Internal Auditors External Auditors Regulators and Administrators Participants Software Vendors and Service Providers

  10. Challenges of Working with Data How do ACL, IDEA, ETL and other tools span the gaps? Similar Data Account, Amount, Date Different Data Dictionaries: Field names, field order System 1: AccountNo, Amount, Date System 2: MonetaryAmount, PostDate, AccountNumber System 3: PostingDate, Account#, Value System 4: Date, Journal, Account, Amount Different Data Formats CSV ASCII WKS Different Representations for the same concepts in common data field Journal: PJ, Payroll Journal, Payroll Date: 12-31-03, 20031231, 12/31/03

  11. XBRL GL is Voluntary Agreement • System 1: AccountNo, Amount, Date • System 2: MonetaryAmount, PostDate, AccountNumber • System 3: PostingDate, Account#, Value • System 4: Date, Journal, Account, Amount • XBRL GL says: • accountMainID • amount • postingDate • sourceJournalID • (and 400+ other data fields)

  12. Joining Systems qbxml qbxml smbxml smbxml Intacct xml Intacct xml SAP SAP Peoplesoft xml Peoplesoft xml Oracle

  13. Standards-based Data Interchange XBRL GL qbxml qbxml smbxml smbxml Intacct xml Intacct xml SAP SAP Peoplesoft xml Peoplesoft xml Oracle Industry transactional XML

  14. SaaS, Upgrading, Auditing Accounting System Trial Balance CPA Adjustments Accounting System Budget Chart of Accounts Accounting System B Accounting System A Customers, Vendors, Employees Open AR, AP, Inventory Status Journal Entries, Ledger History

  15. External Systems Tax information XBRL GL Tax representation format Public Books Operational formats Operational Systems Forensic representation format Management Reporting Consolidation Systems Link to other standards Leverage other standards Harmonize other standards

  16. Designed to “Mind the Gap” and the GAAP • Facilitate the automated and seamless audit trail • Provide new transparency across systems • Designed especially to help capture reconciliations • Book to tax (permanent, timing) • US GAAP, local, IFRS

  17. XBRL For Internal Use • Systems integration • Data access, assembly and overview • Data quality • Validation at the “source” • Consistency in data validation rules and analysis/visualization of data • Redefinition of spreadsheets as user interfaces not data storage/transformation facilities

  18. XBRL For Internal Use • In all these areas, opportunities come from • Elimination of one-way interfaces between systems • Elimination of manual reconciliation processes at all levels of data integration/summarization • Seamless traceability of any information to its source • Reusability of consistent templates for visualization, validation, and analysis across applications/business units • No tight coupling between data, key processes related to data such as validation, reconciliation and analysis, and applications where the data is stored

  19. What Does It All Mean For IA • Migration from manual to automated processes in key activities • Ability to more efficiently access and integrate entity-wide data • Abstraction of business rules and controls that can be applied across a wide range of software applications • Lower cost operating environment

  20. What Does It All Mean For IA • Broader set of monitoring controls and assessments – ultimately enabling continuous auditing and monitoring • Connect resources to specific data concepts • Relationships • Labels • References to authoritative guidance and internal policies • Libraries of business rules, entities, assertions, risks, and controls

  21. SOX and Internal Controls • Improving report review and assembly • Reducing spreadsheet proliferation • Reducing/eliminating manual controls • Eliminating manual data access across disparate information sources • Rationalizing disparate and redundant controls that are application-specific rather than purpose-specific

  22. Audit Issues Specific to XBRL • Taxonomy related • Use of an appropriate taxonomy • Use of the appropriate version • Corporate extensions • Data mapping related • Consistency and completeness of the mapping process • Compliance with the XBRL Specification and with relevant best practices • Taxonomy • Instance documents

  23. Where To Go From here • Awareness and education on the real scope of XBRL • Evaluation of internal audit implications of the mandate and of other related reporting processes – for entities subject to the SEC or other mandate • Identify and prioritize areas that are logical candidates for the application of a standards-based approach • Manual control processes where automation would bring the most significant benefits. • Areas of priority for the application of rules-based compliance testing. • Automation of persistent control assessments across disparate systems (e.g., payables controls)

  24. Resources • THEIIA white paper http://www.theiia.org/recent-iia-news/?search=xbrl&C=801&I=9119 • XBRL International websitehttp://xbrl.org/GLFiles • GaLaPaGoS – Global Ledger Practices Guide for Study http://gl.iphix.net • XBRL members resources [INT-GL] • Public XBRL GL mailing list http://groups.yahoo.com/group/xbrl-gl-public • Monthly XBRL column in IMA’s Strategic Finance magazine http://glg.iphix.net/?page_id=11

  25. Questions Gianluca Garbellotto President/CEO, Iphix XBRL Global Ledger WG Chair Email: gg@iphix.net Blog: http://glg.iphix.net

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