Xbrl and the Sec Interactive Data Mandate

...

The Auditing Standards Board’s (ASB) attestation standards on “Agreed-upon procedures” (AT 201) govern the provision of assurance on submission of XBRL documents to the SEC (ASB 2001b).[7] Given the considerable variation between corporations and the need to fine-tune the engagement, the “agreed-upon procedures” attestation is the most appropriate form of voluntary assurance. The ASB defines an agreed-upon procedures engagement as one where an assurance practitioner “is engaged by a client to issue a report of findings based on specific procedures performed on subject matter. The client engages the practitioner to assist the client in evaluating subject matter or an assertion as a result of a need or needs of the client” (ASB 2001b). The client and the assurance practitioner “agree upon the procedures to be performed by the practitioner that the client believes are appropriate. Because the needs of the client may vary widely, the nature, timing and extent of the agreed-upon procedures may vary as well; consequently, the client assumes responsibility for the sufficiency of the procedures since they best understand their own needs” (ASB 2001b). Agreed-upon procedures under the attestation standards provide the lowest level of assurance by an assurance practitioner.

Auditing Standards Board Statement of Position 09-1

In 2009, the ASB issued Statement of Position (SOP) 09-1 “Performing Agreed-Upon Procedures Engagements that Address the Completeness, Accuracy or Consistency of XBRL-Tagged Data” (ASB 2009).[8] SOP 09-1 provides XBRL-specific guidance to assurance practitioners within the context of the Board’s AT 201 “Agreed-Upon Procedures Engagements.” SOP 09-1 reiterates the relative responsibilities of the client and the assurance practitioner. The major points of SOP 09-1 are:

Pre-conditions for the attestation engagement: The pre-conditions for conduct of an engagement under SOP 09-1 include the independence of the assurance practitioner, agreement on the assurance criteria and existence of written assertions on completeness, accuracy and consistency of the XBRL report (“instance document”).

Agreement on procedures: As might be expected given that attestation on XBRL instance documents is undertaken under the “Agreed-Upon Procedures Engagements” rubric it is vital that the assurance practitioner and the client do indeed agree on the procedures that the assurance provider will undertake. This agreement must be in writing.

Codifying the engagement: The SOP requires the assurance practitioner and client fully document their understanding of the engagement. This includes an exchange of letters between practitioner and client. The letters between the assurance practitioner (Grouse and Honor LLP) and the client (Adios! Airways Inc.) are made available in the body of the case.

Deciding on the procedures: The SOP notes that practitioner and client have a flexible choice of procedures. The SOP sets out typical procedures and findings in an appendix. This case embeds some of the suggested procedures, suitably adjusted. Importantly, while the SOP does not prescribe the agreed-upon procedures, it does set a floor to the procedures. The SOP notes that “merely reading the work performed by a third party involved in the preparation of XBRL-tagged data (for example, service provider)” would be an “inappropriate procedure.”

Report: The SOP sets out the requirements for the report prepared by the assurance practitioner. An agreed-upon procedures engagement requires a more open-ended report than is the case with the relatively “cookie cutter” form of the audit report on the audit of financial statements. There are some standard parts of the report (e.g. list of procedures and identification of subject matter and criteria). The essence of the report is the listing of the agreed-upon procedures and the assurance practitioner’s findings.

Attestation on Adios! Airways Inc.’s XBRL Filings with the SEC

It is 21st October 2014. You are Erica Kohler, a manager in the XBRL practice of Grouse and Honor LLP, of New York. Exhibit 1 summarizes the individuals and their title. You have very recently taken over responsibility for the “agreed-upon procedures” engagement for the XBRL filings by Adios! Airways Inc. Your colleague Leroy Defliese, who was in charge of the engagement, has been urgently reassigned to other engagements.

Adios! Airways Inc. is a US-based airline. The airline services the tourist markets of the Caribbean and Latin America. It is listed on the New York Stock Exchange with the code A!A and is based in Miami, FL. The auditors for Adios! Airways Inc. are Paton and Littleton LLP, headquartered in Chicago.

The first filing by Adios! Airways Inc. (A!A) in XBRL format was in 2011. The new Chair of the Adios! Airways Audit Committee, Ms. Joanne Queenan, has identified the SEC XBRL filings as a key risk. In an effort to manage this risk she and her committee have required the CFO, Bernie Kester, to engage an assurance practitioner to review all aspects of the XBRL filings. The Committee has instructed that the engagement be with a practitioner other than the independent auditors to mitigate any potential appearance of the lack of independence. Mr. Kester reached out to other CFOs for assistance and identified Grouse and Honor LLP of New York, NY as the assurance provider. Grouse and Honor (G&H) is a relatively small firm that is a specialist in XBRL, SEC filings and information technology. Most of the staff in G&H holds both the CPA (Certified Public Accountant) and CISA (Certified Information Systems Auditor) qualifications.

After discussion between A!A finance staff and Robert Grouse, partner of Grouse and Honor LLP, the two parties agreed upon a set of procedures. These procedures are set out in the Engagement Letter (see Exhibit 3) from G&H to A!A.

When you pick up the engagement from Leroy Defliese, he passes you the engagement file. The engagement file contains all of the documents necessary to complete the engagement. The second document in the file is the Client Representation Letter with Attachment (Exhibit 4). This is followed by (Exhibit 5) the notes of an interview that Martina Trueblood, Senior at G&H conducted with Paul Spacek, Director of Financial Reporting in the A!A Controllers’ Office. The interview covers the management processes of the XBRL instance document production process. Early in the engagement, it became clear that A!A outsourced the production of the XBRL documents to a Baton Rouge, LA service provider, Pretty Poodle LLC. Management of the outsourcing process is the focus of the interview.

Martina

...