Audit Implications of the EU's European Single Electronic Format (ESEF) for EU and US Digital Financial Reporting

• In Event: 3.03. Audit Reporting Requirements

Abstract

Beginning in 2021, over 5,300 EU listed companies are mandated to file their annual financial reports using Inline XBRL (iXBRL), in accordance with a 2019 EU Regulation known as the European Single Electronic Format or ESEF. This article spotlights a significant distinguishing feature of ESEF compared to U.S. XBRL rules, which is the EU’s audit mandate for ESEF XBRL filings. Despite the SEC’s XBRL phase-in, over a decade ago, and over 10,000 U.S. filers, audits have never been required. We initially examine ESEF’s background and details. This is followed by an analysis of ESEF’s audit requirements and suggested auditor guidelines provided by three influential EU accounting organizations. Next, we investigate the pioneering efforts of Germany, the first EU nation to draft an ESEF Audit Standard. The article then critically compares and contrasts ESEF audits to U.S. Data Quality Committee (DQC) guidance for SEC filings. Our study concludes with observations and a look to the future development of XBRL assurance.

JEL Classifications: C55; F23; G15; G18; M40; M41; M42; M48.

Keywords: iXBRL; ESMA; ESEF; XBRL; Transparency Directive; audit; digital financial reporting

Authors

• Mark A Holtzblatt, Cleveland State University

• Kristine M Brands, United States Air Force Academy