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Understanding the Notion of Zero Defect XBRL-based Digital Financial Reports

The notion of "Zero Defect XBRL-based digital financial report creation" (see this blog post for more detail) is a collection of values, principles, techniques, and practices. It is a philosophy. The objective is to create an XBRL-based digital financial report which is free from objective mistakes such as logical, mechanical, and mathematical defects. The philosophy is a means to achieving the objective.

Having financial reports free from such easy to agree with objective mistakes lets professional accountants and analysts that interact with such reports be confident in the meaning of the underlying facts being conveyed by the report so that they can focus on the subjective aspects where they add the most value, areas where computer assisted verification of financial reports is impossible because of the limitations of computer capabilities in processing information. (To understand that a computer's ability to process information is not infinite, read this information about the notion of problem solving logic.)

Machine-readable business rules provide a safety net of direct evidence to support report quality and compliance with reporting standards and regulatory rules.  With this approach, near zero defects (Sigma level 6, 99.99966% correct) is achievable at a lower cost and higher quality than current manually oriented approaches.  Further, quality is verifiable whereas under current approaches since measurements cannot really be taken true quality levels are unknown.

And so, the financial report is verified with the assistance of automated business rules and all such business rules must pass.  Business rules are suggestive evidence that a financial report has no logical, mechanical, or mathematical defects.  Passing all business rules is not definitive proof that a report is 100% correct in all regards (because business rules could be missing), but the business rules are certainly an excellent first line of defense and if the appropriate business rules are created a very high comfort level is achievable.

This leaves professional accountants to focus on the subjective areas which are beyond the capabilities of machine-based processes to verify.

More to come...  Stay tuned!

Posted on Friday, November 11, 2016 at 08:43AM by Registered CommenterCharlie in | CommentsPost a Comment

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