Could XBRL have helped in detecting frauds?

Well the answer is a little complicated. Let me put it this way. If the Company Law Rules said a director should not be reappointed if he has already been a director, and you file a Form 32 in xbrl, within 2 minutes of filing you will get a query saying…’you have reappointed Mr. A as a director…but he has already completed 9 years’….

The accounts are cleaned up to a great extent by the xbrl (which is a reporting standard not an accounting standard). XBRL does not improve the level of disclosures, but it improves the quality of information available to you.

Some fantastic things can happen. The Profession tax authorities can access the salaries return with the P&L figures. The PF authorities can check with the professional tax deducted. Similarly if Raju of Satyam had not deducted profession tax, his return to the income tax authorities and to the profession tax authorities would have shown inconsistencies.

Could it have prevented fraud? Doubtful. Human greed does not change. XBRL will immediately point out inconsistencies. Not every inconsistency is a fraud – but yes it raises ones worries. If I find a company which has a totaling (!) mistake in the balance sheet, I would be worried. XBRL would reject it at the time of submission. Thus the quality of data goes up.

If all the company law filings are put in xbrl mode, directors names, addresses, din number,….will all be checked and inconsistencies thrown up. However somebody who gets the query decides not to act, or if he has a friend in the right places……LOL.

See what Sucheta Dalal has to say about the Ambanis…not very amusing.

http://moneylife.in/article/reliance-communications-dubbed-poster-child-of-everything-wrong-with-corporate-india/18258.html#.TifDTfrTUcg

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  1. Subra,

    Since analyzing data interests me, is XBRL only for the specialists or can novices like me also learn how to use it.

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