iXBRL Early Adoption, Audit Efforts and Audit Resource Allocation

Abstract

This study examines how inline XBRL (iXBRL) early adoption impacts auditor effort and audit
resource allocation. While iXBRL can make financial reporting information accessible to a wide
range of external stakeholders, the presentation format change should have no impact on auditor
behavior. Audit firms note that presenting XBRL metadata on top of audited financial statements
could lead to an expectation gap where external stakeholders believe that the inline tags have been
audited despite no procedures being required. We find that iXBRL early adoption is associated
with higher audit fees. Further, among non-adopting firms, engaging with an audit partner with an
iXBRL client(s) is associated with a negative audit effort spillover effect. Non-adopting clients
with a partner exposed to iXBRL clients are associated with a greater likelihood of a financial
misstatement and filing financial reports late. We provide timely information on iXBRL adoption’s
unintended effect on audit outcomes.

Keywords: inline XBRL; audit effort; knowledge spillover; early adoption

JEL Classification: G