|“Spreadsheets have been shown to be fallible, yet they underpin the operation of the financial system. If the uncontrolled use of spreadsheets continues to occur in highly leveraged markets and companies, it is only a matter of time before another ‘Black Swan’ event occurs [Taleb, 2001], causing catastrophic loss. It is completely within the realms of possibility that a single, large, complex but erroneous spreadsheet could directly cause the accidental loss of a corporation or institution, significantly damaging the City of London’s reputation.” Grenville J. Croll, 2009 [http://arxiv.org/abs/0709.4063]|
The dependency on spreadsheets, in particular by finance, those people in the business charged with defending the reputation of the company is continuing in spite of yet more and more stories coming to light of failures in process and governance along with other failures in data quality within those spreadsheets.
Auditors must be inwardly rubbing their hands with glee every time they walk into an office where they need to review financial reporting based on spreadsheet consolidation; let’s face it, what are they faced with? Large, complex spreadsheets relying on inputs from multiple other workbooks and typically they are riddled with errors. In fact Eusprig, the European Spreadsheet Risks Interest Group, has a whole host of horror stories on their site but their research shows “The reliability of a spreadsheet is essentially the accuracy of the data that it produces, and is compromised by the errors found in approximately 94% of spreadsheets. Understandability refers to how easily a user or auditor can make sense of the spreadsheet, and is fundamental to the implementation of Sarbanes- Oxley.” Ruth McKeever et al [http://arxiv.org/abs/0908.0935]
So with this as the back story it leaves auditors with no choice but to spend inordinate amounts of time trying to tie the data back to the GL due to the lack of audit ability native to the spreadsheets. Of course with lack of audit ability in the spreadsheet then the integrity of the data is totally open to question and therefore the auditors reputation as well as the clients is at risk if mistakes are allowed to slip through the net.
Of course the spreadsheet is not the only area for risk that the client needs to be concerned about, many of these spreadsheets especially those used in consolidation contain a number of significant pieces of logic and macros so dependency builds upon the spreadsheet architect – who built the workbook? Many organisations have a single point of failure by depending on this one person who has built a workbook the way that makes sense to them to achieve the consolidated results and believe me when it comes to creating spreadsheet solutions there is definitely more than one way to “skin that cat” meaning that even an experienced consolidation accountant won’t necessarily recognise the content of a spreadsheet and the way it has been constructed.
It is for these reasons that itelligence has invested heavily in the creation of a systemised solution to financial consolidation and regulatory disclosures. The solution delivers through the use of itelligence IP the following:
- Pre-built and integrated Financial Consolidation & regulatory reporting models
- Full support for GAAP to IFRS transition and pre-configured consolidation rules with eliminations, calculations & workflow
- Standard reporting pack including automated cash flow statement and consolidated Balance Sheet and I/S
- Provides audit trail, controls and validations in a secure, audit-able environment
- Increase finance user adoption with a solution that uses native Microsoft Office and Web browsers for all solutions
- Flexible and extensible framework for extending the solutions useful life with additional planning and reporting modules available for integration
In support of our “intervention program” to help finance people reduce their addiction to spreadsheets and help companies reduce the risks associated with spreadsheets we are running a webinar in conjunction with the UK & Ireland SAP User Group (UKISUG) on the itelligence solution on 29th October, details and registration can be found here: https://www4.gotomeeting.com/register/715963527
In the event you are unable to attend the webinar, we are additionally sponsoring the UKISUG conference in Birmingham, UK on 23rd – 25th November, more details can be found here: https://www.sapusers.org/conference/ where we will also be demonstrating a number of other solutions for finance.