Financial Reporting and Auditing Agent with Net Knowledge (FRAANK) and eXtensible Business Reporting Language (XBRL)

Abstract

This paper describes the development and applications of FRAANK—Financial Reporting and Auditing Agent with Net Knowledge. The prototype of FRAANK presented here provides automated access to, and understanding and integration of, rapidly changing financial information available from various sources on the Internet. In particular, FRAANK implements intelligent parsing to extract accounting numbers from natural-text financial statements available from the SEC EDGAR repository. FRAANK develops an “understanding” of the accounting numbers by means of matching the line-item labels to synonyms of tags in an XBRL taxonomy. As a result, FRAANK converts the consolidated balance sheet, income statement, and statement of cash flows into XBRL-tagged format. Based on FRAANK, we propose an empirical approach toward the evaluation and improvement of XBRL taxonomies and for identifying and justifying needs for specialized taxonomies by assessing a taxonomy fit to the historical data, i.e., the quarterly and annual EDGAR filings. Using a test set of 10-K SEC filings, we evaluate FRAANK's performance by estimating its success rate in extracting and tagging the line items using the year 2000 C&I XBRL Taxonomy, Version 1. The evaluation results show that FRAANK is an advanced research prototype that can be useful in various practical applications. FRAANK also integrates the accounting numbers with other financial information publicly available on the Internet, such as timely stock quotes and analysts' forecasts of earnings, and calculates important financial ratios and other financial-analysis indicators.

Analysis of XBRL Literature: A Decade of Progress and Puzzle

“…Other XBRL related topics covered in academic journal included the SEC's interest in a Financial Reporting using XBRL (Debreceny et al 2005), Auditing and Assurance with XBRL (Bovee et al, 2005;Plumlee and Plumlee, 2008) and Financial Reporting implications (Hodge et al 2004). More recent XBRL related articles in the academic journals included a look at the potential synergies between the REA model and XBRL GL (Amrhein, Farewell and Pinsker, 2009) and an experimental study of the relationship between reporting format and user perceptions, preferences and performances (Ghani, Laswad and Tooley, 2009).…”

A hybrid method for taxonomy creation

“…In their view although XBRL is likely to improve comparability and consistency of financial reporting, and may facilitate near-continuous reporting, some questions arise regarding correspondence of the proposed taxonomy with the firms' preferred reporting practices. Bovee et al (2005) proposed that there should be an empirical approach towards the evaluation and improvement of XBRL taxonomies, so that the taxonomy matches with historical data. Bovee et.…”

Continuous Data Auditing as an Automation Tool for Business Control

“…Segundo BOVEE et al (2005), vale destacar que existem estudos de modelos de automação, baseados em agentes inteligentes, responsáveis por converter e consolidar demonstrações financeiras, incluindo balanços patrimoniais e fluxos de caixas em XBRL, como o já existente protótipo denominado FRAANK -Financial Reporting and Auditing Agent with Net Knowledge. Uma técnica de auditoria eficaz para o protótipo proposto seria o uso da auditoria contínua.…”