SYNOPSIS
Accounting and auditing standards help manage a compromise between users' desire for more information and the costs to prepare and transmit that information. Previously forced to manage a paucity of information, businesses now look to capitalize upon the massive volumes of data and metadata that fill petabytes of space in their servers. Likewise, data from many sources and in many forms, many of which are irrelevant, inundate investors. Accounting and auditing standards have not kept pace, maintaining an emphasis on presentation, aggregation, and sampling. This essay argues that a change in standards to focus on data, the processes that generate them, and their analysis, rather than their presentation, will add value and relevance to the accounting profession, empower end users, and improve the efficiency of the capital markets.
XBRL (eXtensible Business Reporting Language) has become an important element of the financial reporting landscape. This paper provides a discussion of the effects of XBRL on the usefulness of financial data. Using the theoretical framework of the technology acceptance model (TAM), we examine XBRL's potential to improve the usefulness of reported financial information. As XBRL gains wider acceptance, we examine five axes along which XBRL standardization will propagate: current data, disclosure format, historical data, data fidelity and assurance, and third-party data. We also call attention to new research opportunities that may arise as XBRL and related technologies mature.
We propose a methodology for Continuous Risk Monitoring and Assessment (CRMA). As a new component of Continuous Assurance (CA), CRMA converts static CA systems into dynamic andadaptable systems that respond to changes in audit risks from client business risks, thereby improving the relevance and robustness of CA systems to changes in client business risks and possible business failures. The present methodology proposes to develop relevant leading and lagging indicators to monitor andassess a client's business risks and recognize emerging business risks or harmful impacts of materialized business risks in near real-time. To illustrate, we develop a lagging indicator of reputational damage measured from real-time postings published in social media websites. We present two cases where the present lagging indicator is measured using public Twitter messages ('tweets') and used to assess the potential reputational damage to two large corporations.
Many steps in the creation and dissemination of new accounting standards lag behind the rest of the modern world. Issues are often addressed too late to rectify major problems, in language at once too vague to deal effectively with the nuances of real world business decisions, and too lengthy to be of use to managers who need to easily and quickly absorb a new manner of thinking. Standards must become clearer, more concise and more timely.We advocate an expansion of the FASB's promulgation framework. Specifically, we advocate an alternate, pseudocoded presentation. By translating written standards into a form that can easily be adapted by software developers into proprietary languages, the FASB will reduce ambiguity, increase uniformity of application, and reduce lag between the introduction of a standard and its universal implementation. We present and discuss two examples of the application of pseudocode to pre-and post-codification accounting standards.
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