XBRL assurance

Key takeaways

XBRL assurance belongs to science; place it in that map before memorising details.
Learn the definition first, then one example that makes the definition concrete.
Connect XBRL assurance to a quantity you can measure, compute or draw — that is where exam questions come from.
Reproduce the core statement of XBRL assurance from memory before moving on to harder problems.

Reference excerpt

XBRL assurance is the auditor's opinion on whether a financial statement or other business report published in XBRL, is relevant, accurate, complete, and fairly presented. An XBRL report is an electronic file and called instance in XBRL terminology. IFAC and other accounting organizations are discussing the topic to decide on a common approach and XBRL auditing standards. The auditor may give assurance to an XBRL financial statement, an XBRL business report and XBRL real-time reporting (often referred to as continuous reporting). The short term focus is on XBRL financial statements and regulatory reports, while the future focus is expected to be more on real-time reporting.

Digital reporting process An XBRL report is part of a digital reporting supply chain. The auditor should not focus only on the reliability of the report itself. It is better to focus on the whole supply chain including the communication over a network of the report. The auditor needs to check if the report that has been sent (and received) is complete and in time. In assessing the XBRL reporting process the auditor can use a reference model in which the layering of the whole digital reporting supply chain is reflected. The auditor performs an audit on every layer of the digital reporting supply chain, with assistance of experts and use of software tools on specific areas. A known example of a reference model is the OSI model. The use of a more comprehensive and detailed reference model by the auditor seems logical.

Model XBRL assurance is a container concept which covers multiple types of XBRL reports, audits, audit reports and related topics. In order for the auditor to be able to give the assurance, several aspects need to be clear:

The identification of the audit object The XBRL audit objectives, XBRL auditing standards and audit approach that fit with the XBRL audit object; Content of the audit report, the text including the auditor's opinion; How to keep the (unbreakable) link between the (electronic) audit object and the audit report with use of the auditor's (electronic) signature. With XBRL assurance the auditor needs to distinguish between primary and secondary audit objects:

The primary audit object is the XBRL file (instance) containing the data. The auditor may give assurance to an XBRL financial statement, an XBRL report or XBRL real-time reporting. The secondary audit objects containing metadata that play a role in the XBRL reporting chain: The XBRL taxonomy, in three different instances: (reporting on the basis of) a standard taxonomy (reporting on the basis of) a custom taxonomy (reporting on the basis of) a combination: both standard base-taxonomy and custom extension-taxonomy. Presentation- or rendering metadata may come in different forms: XSLT stylesheet, inline XBRL, XBRL rendering linkbase or proprietary software. The term standard taxonomy is here used in the context of clear ownership. A standard taxonomy is owned by an authoritative body and responsibility for the quality is taken by the owner. Obvious taxonomy owners are governments, regulators and standard setters. Ownership can be linked with creation, maintenance, publication and/or certification of the taxonomy. A custom taxonomy is not owned by an authoritative body. Base-taxonomy and extension-taxonomy refer to the XBRL mechanism where an extension-taxonomy refers to -or imports- a base-taxonomy to expand the available reporting concepts and/or their relations. XBRL assurance can be described using following model:

Description

Audit objectives and approach The following, mainly XBRL specific reporting steps serve as a basis for the audit approach. The auditor checks that:

the right standard (base) taxonomy has been used; the custom (extension) taxonomy is complete, correct and accurate; the sourcedata used for reporting is reliable; the correct and complete mapping (or tagging) of sourcedata to taxonomy elements has occurred; the XBRL report (instance) is technically correct and validates with the taxonomy; the sending of the XBRL reporting was complete, accurate and timely. The distinction between a standard (base) taxonomy and a custom (extension) taxonomy is important for the auditor. A standard taxonomy is normally owned, created and published by the government or regulator. It is the responsibility of the government or regulator to create a taxonomy that is correct. The quality of a standard taxonomy is fixed input for the auditor. The auditor just needs to check -with help of software tools- that the right taxonomy is used. With a custom (extension) taxonomy this is not the case. The auditor needs to validate the custom (extension) taxonomy, a secondary audit object. He needs to perform an audit to check if this taxonomy complies with regulations and if it is accurate and complete. A significant difference with paper based assurance is the concept of material misstatement. Material misstatement concerns the accuracy of the audit opinion on a financial statement or filing as a whole. An XBRL report contains a collection of individually identifiable business facts. The facts are building blocks of an XBRL report. Material misstatement in an XBRL report concerns the individually identifiable business facts.

… excerpt ends here. Continue reading the full article.

Worked examples

Example 1 — a first encounter with XBRL assurance

Start with the simplest possible case. Write down what XBRL assurance claims or describes in one sentence, then invent the smallest concrete situation in which that sentence is true. In science, the smallest case is usually a single object, a single equation or a single measurement. Check that every symbol or term in your sentence has a meaning in that case.

Example 2 — changing one variable

Take the situation from Example 1 and change exactly one quantity: double it, halve it, or set it to zero. Predict what should happen to XBRL assurance before you calculate. Comparing your prediction with the result is the fastest way to find out whether you understand the idea or only the words.

Example 3 — an exam-style question

Typical questions about XBRL assurance ask you to (a) state it precisely, (b) apply it to given data, and (c) explain a limitation. Practise writing all three answers in under five minutes; the third part is what separates a full-mark answer from an average one.

Applications of XBRL assurance

In research: XBRL assurance appears in science research whenever the underlying quantities have to be modelled precisely. Papers usually cite it as a starting assumption and then explore where it breaks down.
In technology and industry: Engineering practice reuses XBRL assurance in design rules, simulations and safety margins. Knowing the idea lets you read a specification sheet and understand why the numbers look the way they do.
In the classroom: XBRL assurance is common in secondary-school and first-year university syllabi. It links to neighbouring topics Auditing, Financial accounting, so understanding it makes those chapters shorter.
In everyday life: Look for XBRL assurance outside the textbook — in sport, cooking, traffic, electronics or the sky above you. An example you found yourself is remembered far longer than one you were given.

How to study XBRL assurance in 20 minutes

Read the reference excerpt below once, without taking notes.
Close the page and write down what XBRL assurance means in your own words.
Compare your version with the excerpt and mark what you missed.
Work through the three examples above with pen and paper.
Explain XBRL assurance out loud to somebody else — or to Teacher Smith in the lgStudy chat.

Frequently asked questions

What is XBRL assurance in simple terms?

XBRL assurance is the auditor's opinion on whether a financial statement or other business report published in XBRL, is relevant, accurate, complete, and fairly presented. An XBRL report is an electronic file and called instance in XBRL terminology.

Why does XBRL assurance matter?

Because it connects several science ideas at once: it gives you a definition you can apply, a quantity you can calculate, and a way to check whether a result is plausible.

How should I study XBRL assurance?

Read the excerpt, restate it from memory, then work through the examples and applications listed on this page. The five-step study plan above takes about twenty minutes.

What does this page cover?

It gives you a compact reference excerpt plus original lgStudy explanations, examples, applications and study material on XBRL assurance.