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Improving Audit with, and Auditing, XBRL GL

Improving Audit with, and Auditing, XBRL GL. Eric E. Cohen eric.e.cohen@us.pwc.com 12 th XBRL International Conference Tokyo November 2005. Background. This far, you have heard about XBRL GL and Internal reporting Internal controls IT controls In this session, you will learn about

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Improving Audit with, and Auditing, XBRL GL

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  1. Improving Audit with, and Auditing, XBRL GL Eric E. Cohen eric.e.cohen@us.pwc.com 12th XBRL International Conference Tokyo November 2005

  2. Background • This far, you have heard about XBRL GL and • Internal reporting • Internal controls • IT controls • In this session, you will learn about • Audit community interest in XBRL GL • Representing a seamless electronic audit trail • Active participation – catalyst to benefits

  3. Scope and role of XBRL XBRL GL, the Journal Taxonomy XBRL Financial Statements Business Operations Internal Financial Reporting External Financial Reporting Investment, Lending, Regulation Economic Policymaking Processes Companies Financial Publishers and Data Aggregators Investors Central Banks Participants Trading Partners Auditors Regulators Management Accountants Software Vendors

  4. Audit Community Interest • OECD Taxpayer Services • OECD Tax eAudit • OASIS Tax XML

  5. OECD SAF: Brief History • OECD Committee on Fiscal Affairs Forum on Tax Administration • Begun to consider effect of electronic commerce on tax administrators • Value of a standard audit file in light of 25 EU countries auditing one multinational organization

  6. OECD SAF -> OECD Tax eAudit • Delivered two documents • http://www.oecd.org/document/57/0,2340,en_2649_33749_34910329_1_1_1_1,00.html • Guidance on Tax Compliance for Developers of Business And Accounting Software for Tax Purposes • Guidance for the Standard Audit File - Tax • “[R]evenue authorities should be aware of the on-going development of XBRL GL, which could offer a more holistic approach to audit. They should also be aware of international efforts to develop data standards for compliance needs under the formal OASIS Tax XML Committee.[2] • In their implementation strategy for SAF-T, revenue authorities should consider data formats that permit audit automation today while minimizing potential costs to all stakeholders when moving to new global open standards for business and financial data such as XBRL GL.”

  7. OASIS Tax XML • Under OASIS • www.oasis-open.org • In conjunction with OECD Taxpayer Services • Delivered whitepaper • Support for XBRL and specifically XBRL GL • Expressing interest in a global audit file standard • Committing resources • Whitepaper URL • http://www.oasis-open.org/committees/download.php/14242/OASIS_XML_Position_Paper_for_Tax_Administrations_v2-01.pdf

  8. The Seamless Audit Trail • From initial transaction • Through the system, monolithic or virtual • To reporting • Every system as XBRL GL

  9. From Initial Transaction I N V O I C E Invoice #: 10037 May 2, 2003 ABC Sales Corp. Item Description Qty Extension 1078 Blue Widget 200 2,803.78 1083 Cyan Widget 100 1,402.93 Sub-total: 47,592.33 Freight: Total: 47,592.33 <documentType>invoice</documentType> <documentNumber>10037</document Number> <documentDate>2003-05-02</documentDate>

  10. Through ERP System Actual/Virtual purchase orders Outsourced procurement Outsourced e-ordering PO AP, IM sales orders OE AR, IM items IM bomp Off-site fullfillment Third party payroll customers vendors assets employees AR AP FA PR GENERAL LEDGER REPORTING

  11. To Reporting XBRL “FR” <xbrl taxonomy info …> <unit of measure info> iso4217:usd <context holding date or period 2006-06-30 entity and segments Megacorp scenarios actual> facts with fact value and pointers to above ci:Equipment 5,400 Dimensional Taxonomy XBRL GL <xbrl taxonomy info> Details underlying the 5,400 as provided in the system, and published in the instance <xbrlInfo> <summaryReportingElement>ci:Equipment</> </>

  12. Every System as XBRL Across language Across data definitions Across file formats XBRL GL System 1 XBRL GL System 2 XBRL GL System 3 Account# Description Amount PostDate 勘定科目番号 勘定科目説明文 金額 転記日付 Identificador de la Cuenta Descripción Principal de la Cuenta Monto Monetario Fecha de Asignación/Ingreso accountMainID accountMainDescription amount postingDate accountMainID accountMainDescription amount postingDate accountMainID accountMainDescription amount postingDate

  13. Seamless Audit Trail • XBRL GL can represent any and all of the chain • Cross referencing between XBRL GL documents • uniqueID and other tools • Of course, XBRL GL can only represent what is available

  14. Flow: XBRL GL Can Represent 1. Trigger: a source document is represented electronically 2. Source Journal The document is entered and posted, creating a source journal. 3. Journal entries: The accounting implications are gathered and prepared for the GL. 4. GL Entries: the journal entries are prepared for posting to the GL. 5. Journal History: The entries are posted to the Journal History. 6. Consolidation: The data at journal entry or trial balance level are brought together. 7. Reporting: Consolidated numbers combine for eventual reporting. Invoice Posting Journal Source Journal Distribution To GL Report General Journal Transaction Posting Journal History Report Consolidating/ Consolidated

  15. Unique Attributes Between Stages 1. Document type, document #, C/V/E/O #, document date, physical location 2. Source Journal Code, number, date 3. Source system, entry number, posting date? 4. Entry number, posting date? 5. Originating organization 6. Mapping to reporting 7. ???

  16. XBRL GL Can Capture the Fingerprints Transactions Document number, type, date Party type, ID Convert to/from XBRL GL Convert to/from XBRL GL MD5, SHA1 Document location

  17. Original paper or electronic document Unique index: Document type Document number Document source Document date Court system: Assigned number by liber and page Can simply assign by a counter a unique number

  18. Stat Tax Mgmt FR Integrating the Preparatory Chain TRACING VOUCHING Estimates Accruals/Reserves Adjustments Currency Intercompany Top-side adjustments

  19. XBRL GL • As standard export format for an “audit file” … and more • Built in to audit software today • As payload for Web services tomorrow

  20. As Input to Audit Documentation Standards-based input Standards-based processes Standards-based output

  21. CAATS and CA-AuD • Computer Assisted Audit Techniques • Computed Aided Audit Tools • CA-AuD may • Have embedded CAAT capabilities • Rely on external CAAT services • CA-AuD must • Capture procedures performed • Evidence obtained • Conclusions reached • CAATs need to be smarter, communicate better • Need CAAT/CA-AuD exchange vocabulary • Is it the right CAAT food for the test? • Evidence retention • Reporting CA-AuD: Would you run this test for me please? CAAT: With pleasure – here is your query and results. CA-AuD: Thank you kindly. Hmm, I wasn’t expecting that. Can you increase the sample size? CAAT: With pleasure – here is your query and results. CA-AuD: Thank you kindly. Much better. That’s all for now. CAAT: All your base are belong to us. CA-AuD: Huh?

  22. Interesting Audit Related Fields • Issues: • How can uniqueness for [uniqueID] across accounting systems, both within a single organization and across multiple organizations be encouraged?

  23. Active Participation – Catalyst to Benefits • MAP • Map to your systems and develop a prototype • GAP • Influence your software developers • LAP • Help us determine what’s next • OVERLAP • Help with the XBRL GL to XBRL FR linkages

  24. Questions? • XBRL GL • xbrlgl@xbrl.org • Eric E. Cohen • eric.e.cohen@us.pwc.com Are you chillin' like a villian? No, I'm GL'in like Magellan!

  25. Additional Slides • Organization of tax-related groups in OECD • Cooperation with OASIS Tax XML and XBRL

  26. OECD Tax Related Groups OECD Organization for Economic Cooperation and Development STF IWG SAF TIES WP… WP2 WP1 WP9 CFA Informal Working Group Working groups Committee on Fiscal Affairs Working groups Working groups Working group 9 Tax Information Exchange System Subgroup Standard Transmission File Standard Audit File FTA Forum on Tax Administration (2002) Services Compliance Services Subgroup Compliance Subgroup Deliverables * Note: this is not an official representation

  27. OECD FTA, OASIS, XBRL OECD Organization for Economic Cooperation and Development XBRL Tax XML XBRL GL OASIS Dom Tech SAF XBRL XBRL GL Tax eAudit Extensible Business Reporting Language Organization for the Advancement of Structured Information Standards XBRL Liaison WG Domain WG Technical WG XBRL GL WG formerly IWG Tax XML TC Standard Audit File XBRL GL FTA Forum on Tax Administration (2002) Services Compliance Services Subgroup Compliance Subgroup Deliverables

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