In my last blog post I discussed some enhanced information verification capabilities that I created. I pointed out that for 21 tests, in 17 of those tests over 90% of SEC filers passed the test.
Something occurred to me. I know exactly which information points failed. I know the total number of filers I am analyzing (7,160). I know the total number of information points I am looking for (51). I added a column to my spreadsheet which calculated the information points which FAILED, that number is 16,421.
Some quick, back of the envelope math and I get a 95% pass rate for the 51 information points I am looking at. Here is my calculation:
- Total number of failed tests: 16,421
- Total number of filings where NO information was found because no root reporting entity was discovered (54 entities X 51 information points): 2,754
- Total BAD information points (16,421 + 2,754): 19,175
- Total information points (7,160 filings X 51 information points): 365,160
- Percent of BAD information points (19,175 / 365,160): 5%
- Percent of GOOD information points ((365,160 - 19,175) / 365,160): 95%
Keep in mind that I am NOT using an XBRL processor to grab this information and that I am looking for very specific pieces of information and I am either finding the information successfully or calling this an error. My tests are very aggressive.
What is the error rate in information manually created by data aggregators? Generally, any manual process has about a 2% error rate. So there is a difference between the 95% good information rate that I see and the perhaps 98% good information rate of data aggregators.
This is very encouraging. I would suspect that the error rate in SEC information will eventually get into the range of .01%. This is a very real possibility given a high-quality conformance suite of tests and forcing SEC XBRL filings through a set of agreed upon rules during the inbound submission of the information.
Don't know whether this 95% good informatoin rate can be projected onto all information within a filing including disclosures. Likely not. Filers have more experience with the primary financial statements than with disclosures.