XBRL-based Digital Financial Reporting

When I started as an auditor in 1982, the way a financial statement was created was that a typing pool in a room would type the statement into a word processor; I don't remember if we had laser, they may have been typed on on a type writer. Those in the typing pool who did the typing knew little or nothing about financial statements; they simply typed what was on a piece of paper. Word Perfect and then later Microsoft Word changed that. Now the process is very much different yet it is also very much the same.  Financial statements are still documents and the software application, the word processor, knows nothing about the financial statement that it is being used to create. Others continue to create make incremental improvements to the same old paradigm, a document oriented paradigm.  Artificial intelligence will struggle to use that traditional paradigm. Financial statements would work better as databases, rather than documents. I personally am personally completely rethinki...

In a LinkedIn post, Aleksandra Knödlseder asked, " Why is the “Plug & Play” in Industrial Software still a myth? " Well, it seems to me that you must first have some global open industry standard technical format to transport the information package that will then be "plugged" into and then "played" by some software application that the information was plugged into.  In addition, you need some sort of meta-model or conceptualization , some shared understanding, that would specify what a model must look like to then be expressed using that global open industry standard technical format. The graphic below explains a couple of other things that are necessary to achieve what was described in that LinkedIn post referenced above which describes industrial "plug & play".  First, you need to make sure the sending and receiving software have the same "common shared world view".  For example, is the software making a closed world assumpt...

Most enterprises operate with a multitude of relational databases which have inconsistent database schemas; electronic spreadsheets; electronic word processor documents; HTML documents; PDF files; email messages; system log files; system APIs; and with what amounts to bailing wire, band aids, duct tape, and human effort holding everything together. In their new book, The Future of Accounting ; Dave McComb and Cheryl Dunn call this a "bucket brigade" which is a good description. Per one measurement , the average enterprise uses 275 software applications to get their work done. Each of those software applications don't tend to talk  to one another unless work is done to integrate software with other software.   Even small and medium sized enterprises have similar issues, just fewer software applications; maybe between 10, 20, or maybe 50.  In his book, Software Wasteland , Dave McComb points out that over three quarter of IT spending is wasted. Many people consider thi...

An audit bundle (a.k.a. set of audit working papers) is effectively the set of working papers that formally documents and is the authoritative evidence of the work performed to support the audit opinion provided on a financial statement issued.  Such an audit bundle could support the work of an independent third-party auditor or an internal auditor (i.e. not independent) which performed that work. An audit bundle has many moving pieces. An audit bundle has things like: engagement letter plan and strategy materiality passements risk assessments internal controls documentation such as flowcharts, narratives, walkthroughs prior period financial statements trial balance prepared by client or adjusted trial balance lead schedule which serves as the backbone for the audit bundle detailed trial balances of the various accounts on the trial balance reconciliations sampling documentation confirmations inventory count observations analytical procedures professional judgments made conclusion...

When an accounting or reporting team " closes the books " they generate an archive of material that supports the financial statement which is generated at the end of a month, or end of a quarter, or end of a fiscal year.  This is sometimes referred to as a " closing book " or " closing binder ". When I began as an auditor for Price Waterhouse back in 1982, computers existed but no one really used them in the accounting process quite yet.  The "closing book" for the clients we audited at that time was usually a drawer in a file cabinet or desk that had a bunch of file folders in them.  Each file folder was for a specific type of supporting item like the trial balance printout from the accounting system, the bank reconciliation(s), trade accounts receivables trial balance, physical inventories that were taken, statements received from the bank that told you how much was still do on a loan, and so forth. Eventually, the closing book was created main...

A financial reporting framework is basically the rulebook a company must follow when it prepares its financial statements. A financial reporting framework tells a reporting economic entity things like what they need to report, how to measure the things they report, how to present that information so that others can understand the information, explains the standard "jargon" used, and how to structure what is reported so that users of the information understand how to use that information. There are many different financial reporting frameworks, two of the most well known and widely used are US GAAP and IFRS . One thing that every financial reporting framework has in common is that they follow the double entry bookkeeping model and the accounting equation in some way, shape, or form. Historically, financial reporting frameworks were documented in books or other documents or now document oriented web pages published from, perhaps, a document oriented content management system...