eThesis - School of Business electronic theses

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The main objective of this study is to find out how XBRL will affect big audit companies. Purpose is to find out first of all, why audit companies are involved in developing XBRL and secondly, what are the main outcomes of XBRL for these companies. Also, the value-added of XBRL for other information process participants from audit companies' perspective is discussed.

The specific point of view of audit companies in relation to XBRL is little researched in the past and thus, there is no ready-made theory to be tested. Instead, theoretical part presents previous research that suggests and helps to understand potential implications of XBRL for audit companies. In addition, theory about effective capital markets and information efficiency is utilized.

The study is exploratory in nature as audit companies' point of view in relation to XBRL has not received much attention in the literature so far. Qualitative data was gathered through semi-structured interviews with professionals from audit companies that represent different countries and knowledge areas.

Interviewees' answers to the first research question, what are the underlying reasons for audit companies to be involved in developing XBRL, revealed that audit companies are involved in developing XBRL because of the reputational gains. They also need to understand XBRL well in order to be able to provide assurance on XBRL documents and consulting services for their clients. As XBRL is predicted to change financial reporting practices, it is perceived to be natural for audit companies to be involved in its development. To be involved in innovations was also considered important. Related to the second research question, to whom is XBRL mainly developed for and its value-added for information process participants, the interviewees saw that XBRL benefits mostly authorities and users of financial information such as analysts.

Answering the third research question, what are the main outcomes of XBRL for audit companies, requires that four background factors are taken into account. First factor is whether reporting in XBRL is made mandatory or not in a given country. Without a mandate, XBRL is not likely to have great implications for any function. Second, for what purposes XBRL is used (for example filing financial statements, tax filings or supervisory reporting) determines which functions are affected by it. For example, banks use XBRL and they may need consulting and risk services offered by audit companies. Third, the history and structure of audit firms differ which means that same aspects of XBRL are dealt with in different functions. Lastly, the characteristics of the reporting firm have to be considered. If companies choose to implement XBRL deeper into their accounting systems, then they must have effective internal controls and it also enables more effective way to analyze information.