Audit of Inline XBRL: First Guidelines Published
The Committee of European Auditing Oversight Bodies (CEAOB) has published important guidance for auditors reviewing financial reports published in accordance with the new ESEF regulations.
The guidance takes steps to fill a significant gap in governance: the audit of marked-up information. ESEF requires a single, electronic report to be prepared and filed – and so all aspects of that single file must be subject to audit, including the XBRL mark-ups.
To provide an opinion on whether or not financial statements comply with ESEF requirements the auditor must both ensure that the human-readable layer of the electronic report is audited and must determine whether the information embedded in the report is marked-up in compliance with ESEF requirements. The guidelines state that:
“Taking into account the materiality defined, the auditor should express an opinion (sometimes called “positive” conclusion) on the compliance of the marked-up information with the ESEF requirements.
In cases where the mark-ups are materially misstated, the auditor should express a qualified or adverse opinion regarding this compliance. The conclusion will depend on the severity and pervasiveness of the misstatement(s).
A disclaimer of opinion on this compliance should be expressed, when the auditor is unable to obtain sufficient appropriate evidence in this regard.”
This is not new audit regulation (in the EU that must be determined at a national level) but a set of non-binding guidelines agreed by the audit regulators.
This is a very important first step and should improve both data quality and audit consistency. A huge thank you to everyone within the audit world (regulators, audit profession and issuers) that have worked on this for a very considerable period.
At XBRL International we’ll be looking further into the guidelines and discussing them with a range of stakeholders around the world.
Key to their implementation will be ensuring that audit procedures involve using the auditor’s understanding of a company’s disclosure and business model to ensure that the right tags are being selected, inappropriate extensions are not being used and that relevant extensions are properly anchored to the IFRS taxonomy.
Read the guidance here.
