I have two goals for 2012, both of which relate to improving the quality of SEC XBRL financial filings:
- Goal 1: Help accountants, in particular CPAs, become more consciously competent when evaluating the appropriateness of or otherwise interrogating/ scrutinizing an SEC XBRL financial filing.
- Goal 2: Help get some good software built which enables accountants to better achieve the first goal.
These two goals are definitely connected and from what I have seen and heard. Further, as I see it CPAs are exposing them to a significant professional risk currently. Perhaps CPAs and other accountants don't realize this yet because they are still typically way ahead of their customers when it comes to properly grasping what a correct SEC XBRL financial filing looks like. While the rather slack rules which the SEC have for filers currently comes from, I believe, a desire by the SEC to get filers to accept the SEC's XBRL mandate; I would expect, and I have even heard from others, that the SEC does not have unlimited patience. Rules will get tougher. I think that prediction would be hard to dispute. This will increase the professional risk exposure of CPAs even more.
Errors in SEC XBRL financial filings are not hard to see, you only need two things: (a) years of experience and (b) relentlessness and patience in configuring a process which generally combines numerous software applications. I know this first hand because I have been working to figure this stuff out for many, many years and I have successfully configured a process which I can justify. No stone is left unturned and every step which exists in the process has an easy to explain reason for its inclusion in the process. And honestly I cannot say with 100% certainly that I covered everything. But what I can say is that I put a great deal of time trying figuring out this process and the process is base on many, many years of building XBRL, building XBRL taxonomies, creating XBRL financial filings, etc. So frankly, I would be quite confident in showing the due diligence which are the basis and reasoning for the process and techniques which I personally use.
As such, I believe that I can stand behind the process and techniques which I employ. But what I also find that I can usually ask three or four questions of any other accountant who has created an SEC XBRL financial filng and nine times out of ten show that their process has significant holes.
Most times the accountants are not aware of these holes in their process. Other times they are aware of the holes and it is on their list to fix their process.
I only bring these deficiencies up in order to help rectify the situation. In the short term, regretfully correcting this situation will require more training for accountants involved in the process of creating or scrutinizing an SEC XBRL financial filing. In the longer term, software will be adjusted so that it is more useful.
But, in order to get better software, accountants and CPAs need to be conscious that there is a problem so that they can understand the problem and then put pressure on software vendors to get them the software that they need.
I am in no way blaming accountants, software vendors, the SEC, XBRL US, XBRL International, or anyone else for that matter. I believe that this is simply a part of the maturing process. Pretending that accountants understand what they are doing if they do not may seem expeditious, but I believe that approach to be counter productive.
Stay tuned for more information on the characteristics of a quality SEC XBRL financial filing and the process and techniques which I use to scrutinize such filings.