1. A Relative Cost Framework for Rethinking Assurance of XBRL Filings ISAIS 2011: Rome, Italy Glen L. Gray, California State University, Northridge, USA Michael Alles, Rutgers Business School, USA

2. Questions… How much would you pay to insure your old car with a value of $650? How much would you pay for a glass of wine at McDonald’s? 2

3. History 1969: Al Gore invents the Internet 1999: IASB and FASB each publish reports regarding Web-based financial reporting— Many search problems 1999: Charlie Hoffman invents XBRL 2000: Various groups start exploring XBRL assurance issues—XBRL Int., AICPA, CICA, PCAOB… 2009: SEC mandates phase in of XBRL filings—but does not require assurance 3

4. Scoping Assurance Services Srivastava & Kogan, 2010 Boritz & No, 2011 4

5. Srivastava & Kogan Framework 5

6. Boritz & No Framework 6

7. Who/What Provides Assurance 7

8. Costs: What will the market pay? External cost relative to internal cost –whether it costs less to obtain assurance internally vs. having ex-post assurance of XBRL filing as the external auditor may be tasked with doing External cost relative to preparation cost –extrapolating what happens if the cost of preparing XBRL filings keeps falling while the cost of assuring those statements keeps rising [Assumption: voluntary choices] 8

9. Costs: Volunteer Filing Program 1 st submission/ block-text footnotes & schedules Subsequent submission/ block-text footnotes & schedules 1 st submission/ detailed footnotes & schedules Subsequent submission/ detailed footnotes & schedules Preparation face financials $31,369 (125 hours) $4,312 (17 hours) $4,312 Preparation footnotes $1,750 $25,000$12,500 Preparation schedules $250 $2,500$1,250 Software and filing agent services $6,140 Web site posting$1,000 Total cost $40,509$13,452$38,952$25,202 9

10. Economically Feasible Space: Early Years 10

11. Economically Feasible Space: Later Years 11

12. Shifting Focus to Filing Agents Volume, volume, volume Converting fixed costs to variable costs Shifting assurance from instance documents to processes SAS No. 70/ SSAE No. 16 12

13. Thank You! Grazie Mille! Glen L. Gray [glen.gray@csun.edu] Michael Alles [alles@business.rutgers.edu] Questions?