UWCISA - 5th Symposium on Information Systems Assurance
October 12, 2007
Assurance on XBRL Instance
Documents:
The Case of United Technologies Corporation
University of Waterloo
Efrim Boritz
Won Gyun No
Agenda
 Introduction
 XBRL and Assurance
 SEC’s Voluntary XBRL Filling
 Reporting Framework for Electronic Filings
 Assurance Framework for Electronic
Business Reporting
 Findings
 Recommendations
Introduction
 Increased XBRL implementation for regulatory filings across the world.
 U.S.: SEC XBRL voluntary program on EDGAR and $5.5M to XBRL-US to develop taxonomies.
 U.K.: Plans to make XBRL mandatory for company tax filings from 2010.
 Canada: CSA XBRL voluntary filing program on January 19, 2007.
 Japan: TSE XBRL reporting system in 2006.
 XBRL 3rd in FEI’s top 10 financial reporting challenges for 2007(Heffes, 2007).
 Most companies currently providing their information using XBRL are doing so
without assurance.
 Very limited guidance and experience on XBRL instance document preparation
 SEC’s voluntary XBRL filing program
 Some errors in SEC filings
 Case study of the EDGAR filing of United Technologies Corporation
 Perform mock audit procedures
 Interview preparers and auditors
 Address a number of issues that an auditor might confront if/when provides assurance on
XBRL instance document
XBRL and Assurance
Three Phases in Electronic Financial Reporting
Phase I - Paper Paradigm Electronic Financial Reporting (Past)
Phase II - Paper Paradigm Electronic Financial Reporting Using XBRL (Current)
Phase III - XBRL Paradigm Financial Reporting (Future)
SEC’s Voluntary XBRL Filling
 SEC’s voluntary XBRL filing on EDGAR
 February 3, 2005
 File paper format and furnish XBRL format statements
 MD&A, notes, and accountant’s report are optional.
 Companies create customized taxonomies to enable the XBRL filing to
parallel the paper format filing as closely as possible.
 Some insights into SEC filings
(at February 28, 2007)
 36 companies and total 126 fillings
 Significant parts of the filed instance documents are based on companies’
own customized taxonomy extensions.
 Instance Validation: 51 (49.5%)
 Taxonomy Validation: 114 (90.5%)
 Financial Reporting Instance Standards (FRIS) and Financial Reporting
Taxonomies Architecture (FRTA)
Research Objectives
 Compare the XBRL instance document in detail to the paper format
filing
 Interview preparer to obtain explanations
 To identify issues that an auditor might confront if performing audit
procedures on an XBRL instance document
 To learn about and report on the nature and extent of the work that
would be required to determine whether the translation of the
paper format document to the XBRL document was complete and
accurate
 To provide recommendations for both auditors and XBRL instance
document preparers
Assurance Framework for
Electronic Business Reporting
Client Acceptance
1. Acceptance
Planning
3. Planning the engagement:
Understanding the subject
matter
2. Terms of engagement
4. Assessing the
appropriateness of the
subject matter
Testing & Evidence
7. Obtaining evidence
5. Assessing the suitability of
the criteria
8. Using the work of
an expert
6. Risk and Materiality
9. Management
representations
 From Assurance Working Group of XBRL International (2006)
INTERACTIVE DATA: THE IMPACT ON ASSURANCE, NEW CHALLENGES FOR THE AUDIT PROFESSION
 From Hayes, R., Dassen, R., Schilder, A., & Wallage, P. (2005)
Principles of Auditing: An Introduction to International Standards on Auditing
Evaluation &
Reporting
10. Reporting
Audit Process
A Cross-reference Between PCAOB and AWG
Audit Process
Manual Two-way Tracing: Step I
 Contexts
Audit Process
Manual Two-way Tracing: Step II
 Financial Facts and XBRL Elements
Audit Process
Manual Two-way Tracing: Step III
 Notes and MD&A
Findings
Taxonomy
 Found that only “44.3%” of the 10-Q instance document was based
on the approved XBRL taxonomies.
 Could not determine whether this use of custom extensions is
appropriate due to the lack of assurance standards or practices with
respect to this matter.
 A custom taxonomy was used instead of the approved XBRL
taxonomy that was available.

Accountants Information – Name
<AccountantsInformationName> vs. <AccountantName>
 Used different elements for the same names, signatures, job titles,
and date contained in different exhibits

James E. Geisler and Gregory J. Hayes in the signature section of UTX’s
10-Q were not used in the section 1350 certifications. Instead different
taxonomy elements were used.
Findings
Instance Document
 Contexts

145 contexts

Not in any logical order

Could cause problems in subsequent periods to determine inter-period
consistency (e.g., quarter to quarter)
 Labels

Titles and subtitles were not always presented in the instance document in
a consistent manner, or were missing altogether.

Some labels were missing or not exactly the same in the label linkbase as
in the taxonomy.
 Totals

Some totals which appear in the notes in the 10-Q are omitted in the
instance document.

Sometimes totals are in the instance document and sometimes they are
left as implicit items defined in the calculation linkbase.
Findings
Notes and MD&A
 Disaggregation of textual narratives in both notes and MD&A
Textual Narratives
XBRL Elements
<usfr-pte:CommitmentsContingenciesNote>
<usfr-pte:ContingenciesContingentLitigationEnvironmental>
<usfr-pte:ContingenciesContingentLitigationGovernmentInvestigations>
<usfr-pte:ContingenciesContingentLitigation>
Findings
Accountant’s Report Regarding XBRL Engagement
Findings
Accountant’s Report
 Used own taxonomy for ‘Report of Independent Registered
Public Accounting Firm’ instead of using usfr-ar (US Financial
Reporting - Accountants Report) taxonomy.
Findings
Accountant’s Report Regarding XBRL Engagement
 AWG (2006, p. 24): 9 basic elements should be included in the report.
 PCAOB (2005, p. 6)

An audit report: if the XBRL instance document has been audited.

A review report: if it was reviewed and the report was filed with the SEC.

Do not express opinion: if it was reviewed, but the review report was not
filed with the SEC.

Disclaim an opinion: if it was not covered by an audit report or review report.
 The AWG’s recommended elements were satisfactorily addressed in
the report.
 PWC stated that the underlying information in the 10-Q instance
document has not been audited and did not express an opinion on that
information in the report since the review report prepared by PWC
was not filed with the SEC.
 The accountant’s opinion on the instance document was created in
HTML format rather than XBRL and was filed as a separate document.
Findings
Summary
 Took an XBRL expert about 63 hours to complete (not
counting other steps that would be required)
 Had high assurance that the instance document was a
complete and accurate reflection of UTX’s 10-Q paper format
filing
 Cannot form a conclusion on the fairness ...in accordance
with GAAP of the instance document
 No assurance standards or guidelines for making such an
assessment
 Limited knowledge for evaluating the MD&A, regulatory
information, and the appropriateness of the company’s own
extensions to the XBRL taxonomies
Recommendations
 Auditors’ effort, time, and cost could be reduced.

A deliberate structuring of an XBRL instance document

A logical ordering of elements in the XBRL instance document (e.g., by financial
statement, notes, and MD&A)

An embedded description of the structure

Explanation of why custom taxonomies are required or are preferred to approved
taxonomies.

Create rules for naming attributes (Sgt_Ottis_2004 vs. Context11)

Organize contexts systematically and document rules used to create them

Need Computer-Assisted Audit Techniques
 Assurance on XBRL instance documents.

Some form of comfort/assurance will be necessary.

Need guidance for both preparers and auditors

If an external report is provided, then it should be provided as an XBRL instance
document to utilize the advantage of XBRL

Need a taxonomy for an auditor's assurance report on XBRL instance
Questions & Suggestions