By ABDULLAHI, Sani. Alhaji Ph.D Faculty of Administration,
Ahmadu Bello University, Zaria AUDITING REQUIREMENTS AND eXTENSIBLE
BUSINESS REPORTING LANGUAGE (XBRL)
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OBJECTIVE To present an overview of Auditing, Auditing
requirements and XBRL, as well as the technical aspects relevant to
financial reporting and auditing.
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PRESENTATION OUTLINE Introduction Origin, Meaning and
Objectives of Auditing Qualities and Qualifications of an Auditor
Duties and Rights of an Auditor IFRS and XBRL Auditing and XBRL
Challenges of XBRL Conclusion
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INTRODUCTION Most digital representations of financial
information are coded in Hypertext Markup Language (HTML) The HTML
format also does not allow for easy searching, analysis, or
manipulation of information
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INTRODUCTION Extensible Business Reporting Language (XBRL) was
initiated and developed by a Professional Accountant-Charles
Hoffman but well popularized by a consortium of leading financial
organizations It is designed to make financial reports easier to
post on the Internet and easier to understand once they are
posted
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INTRODUCTION Investors and other financial stakeholders need
accurate and reliable financial information that can be delivered
promptly in order to help them make informed financial decisions.
XBRL meets these needs and is particularly important in improving
the usefulness of financial information delivered via the
Internet
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ORIGIN The word audit came from the Latin word audire, meaning
to hear. The origin of audit dates from ancient times when the
landowners allowed tenant farmers to work on their land whilst the
land owners themselves did not become involved in the business of
farming. The landlords relied upon an overseer who listened to the
accounts of stewardship given by the tenants
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ORIGIN In those days, the receipts and payments of an
establishment were read to the hearing of an individual termed the
AUDITOR. Consequently, the individual to whom the receipts and
payments of an organization were read became known as the auditor
Auditing as it exists today was established only in the later part
of the nineteenth century, born out of the complexity of modern day
business world..
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MEANING The Consultative Council of the Accountancy Bodies
(CCAB), defines auditing as the independent examination of, and
expression of opinion on, the financial statements of an enterprise
by an appointed auditor in pursuance of that appointment and in
compliance with any relevant statutory obligation".
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MEANING An audit is an independent examination of the financial
statements; the auditor must be independent of those responsible
for the financial statements (i.e. management). (ii) Matters to be
addressed in the audit report are dictated by the terms of the
auditor(s) appointment and any relevant statutory and professional
matters that the auditor is obliged to comply with.
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OBJECTIVES The primary objective of an audit under CAMA, 2004,
is for an appointed auditor to express a professional opinion on
the financial position of an enterprise as contained in the
financial statement prepared by the management so that any person
reading and using them can have faith in them
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OBJECTIVES (Secondary) to prevent fraud and errors; to detect
any form of irregularities; to evaluate the effectiveness or
otherwise, of the internal control system within the enterprise; to
assist the management in the establishment of effective auditing
system; to advise on financial matters for efficient decision
making by the management;
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OBJECTIVES (Pay offs) Audited financial statement serves as a
basis of determining the net worth of a business To negotiate bank
loan. For the purpose of taxation. As a basis for measuring
performances by potential investors.
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OBJECTIVES (Pay offs) As a requirement of the Nigerian stock
exchange for a business that is seeking quotation. In aid of
insurance claims. In aid of Professional Advice
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QUALITIES OF AN AUDITOR Independence In the accountancy
profession independence is a concept which is fundamental.
Essentially, it is an attitude of mind characterized by integrity
and objectivity in approach to audit assignment.
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Qualities (CAMA rules) An auditor shall not be an officer or
employee of the client. Auditor is normally appointed by
shareholders so that he is independent of the directors. An auditor
cannot be a partner to an officer or employee of the company. An
auditor can only be removed by the shareholders as they have been
appointed by them. The auditor reports directly to the shareholders
to avoid his independence being hindered.
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Qualities (CAMA rules) The auditor has the right of access to
the books and records of the company at all time. This is otherwise
known as programming independence. The auditor is not qualified
under Section 387 as a receiver of the same company, in the same
accounting year. Auditor's remuneration is fixed by shareholders
and not by the directors. Auditor has a right to make
representations of a reasonable length in case of an attempt to
remove him from office.
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Qualities (Other Rules) The auditor should not be involved in
an assignment where he has relationship either by blood or by
marriage; Acceptance of undue hospitality constitutes a similar
threat to independence; An auditor should not accept to audit a
client where he derives, the greatest proportion of his recurrent
audit fees i.e. more than 15%.
Qualifications A person shall not be qualified for appointment
as an auditor of a company unless he is a member of a body of
accountants in Nigeria established from time to time by an Act. A
connected person cannot be appointed as auditor of a company
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DUTIES OF AUDITORS The primary duty of the auditors of a
company is to make a report to its members on the accounts examined
by them, and on every balance sheet and profit and loss account,
and on all group financial statements ( S. 359 CAMA, 1990)
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Duties (Schedule 6) Whether the auditors have obtained all the
information and explanations which to their knowledge and belief
were necessary for the purposes of their audit. Whether, in their
opinion, proper books of account have been kept by the company and
proper returns adequate for the purposes of their audit have been
received from branches not visited by them. Whether the company's
balance sheet and profit and loss account are in agreement with the
books of account and returns.
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Duties (Schedule 6) Whether in their opinion and to the best of
their knowledge the accounts give the information required by the
Act in the manner required. Whether in their opinion the accounts
give timely, true and fair view; In the case of the balance sheet,
of the state of the company's affairs as at the end of the
financial year; and In the case of the profit and loss account, of
the profit or loss for the financial year.
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Duties (Fiduciary) Auditors should exercise due care and
diligence in performance of their duties. An auditor should not
delegate his authority The auditor should not disclose confidential
information or document entrusted to him during the course of his
audit.
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RIGHTS OF AUDITORS (CAMA) Right of access at all times to the
company's books, accounts and vouchers, (S.360). Right to require
from the company's officers such information and explanations as he
thinks necessary for the performance of the auditor's duties. (S.
360) To attend AGMs, receive all notices of and other communication
relating to AGMs and be heard at any such meetings (S. 363)
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Rights Under S. 364 auditors have rights where there is a
proposed resolution for their removal to: Receive a copy of the
special notice required for a resolution at a general meeting of
the company to remove the auditor. To make representations in
writing of a reasonable length, and To request that the
representation be sent to members of the company.
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IFRS and XBRL IFRS are standards and interpretations adopted by
the International Accounting Standards Board (IASB). They include:
International Financial Reporting Standards (IFRS), International
Accounting Standards (IAS) and interpretation originated by the
International Reporting Standards Interpretation Committee
(IFRSIC)
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XBRL XBRL is a language for the electronic communication of
business and financial data. XBRL is an international computer
language, for coding financial information by adding tags to each
section of financial data, allowing it to be both computer- and
human-readable. XBRL is owned by a consortium (XBRL International).
This consortium comprises 642 companies who are a mixture of
accountancy organizations, consultancy firms and software
vendors.
AUDITING AND XBRL The auditor may give assurance to an XBRL
financial statement XBRL Assurance is the auditors opinion on
whether a financial statement published in XBRL format, is
relevant, accurate, complete, and fairly presented.
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..AUDITING AND XBRL The auditor needs to design procedures that
determine whether the specifications, taxonomy, and instance
documents are appropriate for financial statements. Adequately
designed internal controls over XBRL that have been placed in
operation and are operating effectively are important in ensuring
the integrity and consistency of a particular taxonomy being
applied in an entity.
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..AUDITING AND XBRL General control audit procedures relevant
to XBRL include network operations, application development and
maintenance, and access controls. Application controls relevant to
XBRL address input, error correction, and output. For example, when
a taxonomy is assigned, modified, or added, the auditor should
validate or check an instance document against the taxonomy so to
ensure the tags used are all from the taxonomy.
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..AUDITING AND XBRL When fully implemented, the risks of XBRL
center on the accurate and complete mapping of the financial
information and accounting data to the tags. An adequately designed
and effective internal control structure for XBRL will ensure that
the data retrieved represents valid and accurate transactions, has
integrity, and is recognized in the proper accounting period.
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..AUDITING AND XBRL The Auditor checks that: the right standard
(base) taxonomy has been used; the custom (extension) taxonomy is
complete, correct and accurate; the source data used for reporting
is reliable; the correct and complete mapping (or tagging) of
source data to taxonomy elements has occurred; the XBRL report
(instance) is technically correct and validates with the
taxonomy
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CHALLENGES Resources Software Standards Costs
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CONCLUSION Auditing is a legal requirement for both public
companies and agencies. XBRL is the new driving revolution in the
world of financial reporting with adoption in over 120 countries.
There is no doubt that conversion to IFRS and adoption of XBRL in
Nigeria is a huge task and a big challenge. It is a revolutionary
impact requiring a great deal of decisiveness and commitment. It is
in the best interest of Nigeria to adopt XBRL while implementing
IFRS. A countrywide intensive capacity building programme to
facilitate and sustain the process of adoption is needed as early
as possible.