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The Future of Financial Reporting Part 2: Accounting Quality Model

This is part 2 of an article. For access to part 1, please click here

Publisher: FEI Daily
Author: Leslie Kramer

One initiative that has been moving forward in the US is the development by the SEC© of a data mining system called the Accounting Quality Model (AQM), otherwise known as “Robocop.”

So far, XBRL has served as a beneficial tool in helping the SEC’s Division of Enforcement identify accounting fraud cases, and it has also provided useful to the Division of Corporation Finance as a means of improving financial disclosures quality. The downside, however, is that the review process is rigorous, and time and labor intensive.

This is where AQM comes in. The tool, currently in prototype state, works in conjunction with XBRL and is designed to trawl through 10-K filings an trigger automatic alerts when the system detects suspicious or incorrect accounting practices by publicly traded companies. To date, the SEC’s Accounting Fraud Task Force, a group inside the Division of Enforcement, has been one of the earliest adopters of the AQM model.

For more details on AQM’s operational capabilities, please click here.

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