Governance, Risk & Compliance

Governance, Risk & Compliance

May 11, 2012

Spreadsheet Error Detection Processes Not Changing Procedures

A wide variety of businesses use spreadsheets every day, from sports franchises, to hedge funds to individuals who want to plan their monthly budgets. But dependence on spreadsheets comes with many risks, as there are a host of errors that can appear in any spreadsheet, from hidden data to incorrect formulas.

There are several different schools of thought when it comes to addressing these errors. Some firms recommend grandiose overhauls of processes and procedures. Some solutions, on the other hand, are designed to work on top of existing procedures to find errors and alert spreadsheet managers to their existence.

Many companies feel that spreadsheet errors are best addressed through drastic measures. PricewaterhouseCoopers (News - Alert), for example, suggests a three-step risk management process. First of all, companies should create an inventory of spreadsheets, perform a risk assessment of financial misstatements, and finally implement and assess spreadsheet controls for different groups.

In a report on potential controls to manage spreadsheet errors, Raymond Panko proposed a control framework to assist companies in the creation of accurate reports. He recommends setting up preventative controls, such as SDLC-based methods. He also advises implementing a series of detective controls, like a set of auditing protocols, and then a final level of corrective controls, like change or version controls.

In his blog for Bloor research, Philip Howard discussed different processes that can be put in place to address spreadsheet errors. One strategy he mentions, similar to Panko, is to consolidate spreadsheets at the end of the month. This would involve linking spreadsheets together, creating a unified opportunity to look for errors. Howard also argues that processed-based solutions are ideal for error detection.

In fact, in his paper on enterprise spreadsheet management, Howard investigates a number of different software solutions for spreadsheet management. He uncovers problems with all of them, mostly related to their proclivity for implementing overarching changes in the processes of an organization.

Edited by Jamie Epstein

blog comments powered by Disqus