Why Tagging Errors mean Trouble
As data digitisation and XBRL reporting continue to expand worldwide, it’s crucial that companies are reporting accurate, high-quality data.
Wes Bricker, Vice Chair of XBRL International’s Board of Directors and PwC Vice Chair, US and Mexico Assurance Leader, recently wrote an article for FEI highlighting the importance of accurate XBRL tagging. The article also explains the steps companies in the US can take to avoid errors.
With a huge number of report-users looking straight to the XBRL data, mis-tagging XBRL can corrode a company’s reputation. Despite that, the XBRL US Data Quality Committee (DQC) has found that 34% of the most recent SEC filings include at least one error. To be fair, many of these are minor errors amongst thousands of disclosed concepts. However, these are the kinds of errors that can be easily caught by companies prior to filing because the DQC rule set exists.
Bricker points out that companies devote substantial time and resources towards preparing their financial statements each quarter – effort that is undermined if the same rigour is not applied to the XBRL tagging of those reports as well.
Working with auditors can also help ensure high-quality data. Bricker highlights that in the EU auditors will soon be required to provide an opinion on whether the XBRL tagging within annual reports complies with the upcoming ESEF requirements.
Our view? As we have said here before, it is a fundamental best practice for XBRL data collection that regulators eliminate as many errors as possible by producing, publishing and continually improving a set of data quality rules that can be run by regulated entities prior to submitting their data. Now that the FASB has started to adopt the XBRL US DQC’s rules as part of the official US GAAP taxonomy, there should be no excuse for not running the DQC rules over a draft filing prior to its submission to the US regulator.
The rules are developed by a cross section of leading industry experts, are open to public review and can be freely run by any issuer. Vendors working on SEC filings can (and should) not only ensure that they have relevant XBRL International Software Certification, but they should also ensure that their software meets the requirements of the DQC’s certification program. Data systems operate on the basis of “Garbage In, Garbage Out”. While it is true that companies (especially their audit committees) have an absolute obligation to ensure that their corporate reports are accurate, regulators the world over should always provide objective, public and machine executable rules to help them achieve this in a digital age.
Read the article in full here.