Is it possible that XBRL enabled search technology increases the transparency of company financial disclosures? In my opinion, certainly it does. Whether it is publicly traded companies or privately held companies, people who are charge of management know that most investors and analysts pay more attention to information in the body of financial statements rather than lengthy footnotes and disclosures. That’s why most of the time negative news about a company will be buried in the footnotes of a statement which is in a non-searchable format such as PDF.
The University of Washington and Indiana University provide a 38 page full research report about how XBRL will increase transparency of company financial disclosures.You can download the publication from here.
In a nutshell, XBRL (Extensible Business Reporting Language) is the language of finance accounting. The goal of XBRL is to make the analysis and exchange of corporate information more reliable.
The importance of internal control in organizations has become even more visible after Sarbanes-Oxley. Management is now more aware of weak areas of their internal control and they want to improve efficiency and reduce associated costs with it. According to many experts, XBRL can be used exactly for this purpose. For example, currently the auditors are not able to analyze very large samples at lower materiality levels due to time constraints. By implementing XBRL GL at the beginning of the information supply chain will give auditors an efficient means to question thoroughly detailed transactions at lower materiality levels since processing the valuable data is not going to take as much time anymore. As a result, this will increase the probability of discovering problems or more importantly any fraud.
If you are interested in learning more about XBRL and internal control, The IIA bookstore has a great book called: “XBRL: Potential Opportunities and Issues for Internal Auditors”.
