Financial Statement User Perceptions of Alternative Forms of Assurance on XBRL: An Experimental Investigation

• In Event: Audit Quality

Abstract

The eXtensible Business Reporting Language (XBRL) is being used to facilitate the dissemination of financial information around the world. XBRL reports allow information consumers to automate processing. While the information contained in the XBRL reports is often based on audited financial statements the XBRL report is not audited as part of the financial statement audit. With the exception of India, which requires a certification of the XBRL report, no country mandates separate XBRL assurance or requires for the auditor to consider the XBRL report as part of the standard audit. If information consumers are going to rely on the XBRL reports it is important to understand the type and form of assurance that consumer’s desire. In this study we experimentally investigate investor’s perceptions of seven potential forms of XBRL assurance. Two inherently different investor populations (individual investors in the USA and The Netherlands) serve as participants in this online investigation. While there is some variation between the two countries, we find that investors do differentiate between the assurance or audit reports that explicitly exclude or include consideration of XBRL. Interestingly, reasonable assurance reports on the XBRL reports provide the highest perceived assurance level. This applies whether they are “stapled” to traditional audit reports or reported standalone. Investors perceive limited assurance reports lower than reasonable assurance reports, but not at a statistically significant level. A particular focus of the second experiment conducted in the Netherlands was to understand the attitudes of investors to the provision of assurance on XBRL reports. Some 80% of investors believe that such assurance should be required, with most considering this should be required as part of the audit or in a separate report. This study adds to the rather slim research literature on levels of assurance. It also contributes to the current international debate in regulatory and standard setting communities on the provision of assurance on XBRL reports

Authors

• Roger S Debreceny, University of Hawaii at Manoa

• Stephanie Farewell, University of Arkansas at Little Rock

• Hans Verkruijsse, Tilburg University