XBRL-based Digital Financial Reporting

Accounting and audit is about to get a significant productivity boost.  How? The productivity boost will come from the capability to create a human-machine team using knowledge based systems  (a.k.a. what I call a mindful machine for accountancy ) effectively. Hybrid artificial intelligence, grounded in rules-based artificial intelligence and supplemented by probability-based artificial intelligence, and operated by a skilled, experienced accountant/auditor will make "the average accountant" above average. A super accountant/auditor.  Entire workflows will have significant reductions in the "friction" that exists today. Quality will skyrocket and attaining that level of quality will cost less.  That is the definition of productivity . It is tempting to think that achieving this productivity boost will be easy.  It will not. Attaining this productivity gain will be hard work. Personally, I have been working on this task for 25+ years. The article,  AI leads ...

In this blog post I am going to do something that might seem a bit odd, but I think you might find this contrasting of pantone colors and financial reports helpful in understanding digital financial disclosures. Please read to the end; trust me, this will make sense. Pantone is somewhat of a universal standardized "color language" that ensures a specific color looks exactly the same, no matter who is producing that color or where in the world they are.   The Pantone Matching System (PMS), is a proprietary color naming system used in a variety of industries, such as graphic design, fashion design, product design, printing, and manufacturing.  By giving each color a name and a number and standardizing the colors, manufacturers can all refer to the Pantone system color name or number to make sure colors match without direct contact with one another. The idea behind the PMS is to allow designers to "color match" specific colors when a design enters production stage, re...

In a private group email related to  the creation of the Standard Business Report Model (SBRM) , a colleague from the Object Management Group (OMG) mentioned the notion of "fail loudly" which is one of the most brilliant statements I have heard in years. And the notion of "fail loudly" is connected to other notions related to failure: Fail Loudly Masked Failure Prevent Failure Define Failure Control Failure Cost of Failure Avoiding Failure In the rest of this article I will elaborate on each of the above ideas as they relate to the work performed by professional accountants in the creation of financial reports or performing internal or third party financial audits. Fail loudly "Fail loudly" means that instead of allowing mistakes to accumulate and show up unexpectedly later in a process; software proactively monitors and detects invalid inputs, unexpected states, and violations of assumptions and expectations in real time. If something goes wrong, software...

The Office of Comptroller of Currency (OCC) is a small working proof of concept regulatory and financial reporting scheme that I created for experimentation, testing, training of others, and such. This working proof of concept was inspired by this Wikipedia article on financial statements  which has a JPEG image of a financial statement created by Wachovia National Bank created in 1906. Based on that example financial statement, I created what I call the Office of Comptroller of Currency (OCC) financial reporting scheme.  That very basic financial reporting scheme looks like this when viewed by a human : And here is a screen shot of a digital financial report created using that financial reporting scheme above and viewed within a software application: What is really cool is you can take that raw XBRL and convert that into any number of different forms to view or work with the report model and reported facts.  Here is one example, a basic digital report viewer created by ...

Epistemic risk relates to the risk of being wrong. Requisite variety relates to every possible way of being wrong. To manage epistemic risk, your epistemic "inspection process" or methods of checking, validating, and governing risk must have enough variety to match the possible errors which could occur. As was pointed out in this blog post , "completeness" is not produced by reasoning; what is considered "complete" must be declared or governed in some way.  That is one thing that the Seattle Method provides, a definition or declaration of completeness. What authority do I have to define what is complete? Well, I am not really defining what is complete, I am defining eight indisputable things that are necessary for a financial statement to be considered correct. What I am prescribing is necessary to be considered correct, but it might not be considered sufficient . The ways one can be wrong when creating something like an XBRL-based report when a report m...