LEARN MORE...

Home
Documents
February 2012
3
Spreadsheet Risks, Controls and Testing

Spreadsheet Risks, Controls and Testing

Content type

User Generated

Type

Study Guide

Uploaded By

bznevbjra1

Pages

Showing Page:

1/3

Surname 1

Name

Tutor

Course

Date

Spreadsheet Risks, Controls and Testing

There is no doubt about the integral role that spreadsheets have played in the modern

business. However, while appreciating spreadsheet, we should not get carried away and forget

the concerns and risks as well as the controls and tests that are supposed to work hand in hand

with this business application. It is because of this that spreadsheet risk management has taken

center stage. Hidden errors in spreadsheets might prove catastrophic to a business whenever

important operational or strategic decisions are made based on such calculations. Such mistakes

might also relay the wrong message to shareholders, general public or tax authorities. The

consequences of such might include heavy fines, tainted reputation and consequently low public

confidence. Fraud is another concern that each organization has to deal with when using flawed

spreadsheet.

Spreadsheet has certain common risks that tend to make them vulnerable to any

organization. Unskilled users, data entry and recycling and data loss are some of the common

security concerns in spreadsheet. Inadequate training of those handling spreadsheet leads to

mistakes such as improper referencing, use of inappropriate formulas for complex calculations,

and linking of spreadsheets. There is always a tendency amongst most spreadsheet users to cut

and paste information from one period/transaction to another. Copying and pasting of

Showing Page:

2/3

Surname 2

spreadsheets presents numerous flaws in the final results as the formulas change, links break and

cells become overwritten. While many people know the importance of backing up data, few take

it seriously when it comes to spreadsheets. There is a significant risk if data is not backed up as

hours of data entry will go down the drain. Many users tend to have lots of confidence in the

spreadsheet calculations. This creates an illusion that makes them avoid further scrutiny of the

output. Users also tend to form habits overtime hence they develop tendencies to practices such

as cutting and pasting.

AstraZeneca (AZN.L), Britain’s second largest drug maker, is a perfect example of

spreadsheet risks as evident through their 0.4 percent fall in share prices. In 2011, some

confidential information on the company’s mid-term financial forecast was mistakenly sent to a

sell-side analyst. This information had been embedded in the spreadsheet sent to this analyst. As

it would be, such information went on to become public knowledge leading to a slump in the

shares.

Given all the risks associated with spreadsheets, controls are therefore inevitable for

accurate spreadsheet results. Controls are broadly divided into input control, access control,

change control and logic control. User training is important if there is any chance of getting the

best out of spreadsheets. This training will help them understand the aspects of spreadsheets and

keep them up-to-date with the latest versions. Mistakes associated with cutting and pasting can

be creating three distinct and separable segments for inputs, calculations and outputs. Errors in

formula totaling in columns can be eliminated by using a control total. Error checking formulae

in adjacent cells, automatic total stop and self-checks can be used for further control. Entities

should also establish schedules for regular and frequent backing up of data.

Showing Page:

3/3

Unformatted Attachment Preview

Name Tutor Course Date Spreadsheet Risks, Controls and Testing There is no doubt about the integral role that spreadsheets have played in the modern business. However, while appreciating spreadsheet, we should not get carried away and forget the concerns and risks as well as the controls and tests that are supposed to work hand in hand with this business application. It is because of this that spreadsheet risk management has taken center stage. Hidden errors in spreadsheets might prove catastrophic to a business whenever important operational or strategic decisions are made based on such calculations. Such mistakes might also relay the wrong message to shareholders, general public or tax authorities. The consequences of such might include heavy fines, tainted reputation and consequently low public confidence. Fraud is another concern that each organization has to deal with when using fla ...
Purchase document to see full attachment