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Financial Spreadsheet Quality Control - Article 1

A Bit of History

This series of articles will discuss the importance of financial spreadsheet quality control and provide some methods on how to develop spreadsheets with quality control in mind.

Type this search into your web browser  "
cost of spreadsheet errors" and you will find that using spreadsheets for financial reporting and management purposes can be potentially risky and very costly when the spreadsheets contain errors.

As an example; the following error message was displayed in a government web site in April 2022.
government spreadsheet error message

So how did we get here? Lets go way back in time in the evolution of the modern day accountant when they were truly number crunchers.

The evolution of the modern accountant is closely related to the evolution of the calculator and then to spreadsheets. The evolution of the calculator can be traced in an article at The evolution of the electronic spreadsheet can be traced in an article at The number crunching accountant, with the visor and squinty eyes, existed as early as the 1960s and perhaps even into the 1970s. Its hard to imagine that only a mere 50 years or so ago if you were an accountant chances are you would be using your personal mathematical skills for most of the day. You would be manually adding rows and columns of numbers using only your brain. If you were in practice at that time, it was very tedious, concentrating work. If you made a mistake in your calculations you could spend hours trying to find it. So its Friday afternoon at 4PM and you have to get a special journal to balance (cross and down) before you leave for the weekend. Your mind is tired at the end of the day and week and these numbers are simply not adding up.

What do you do. Well, maybe its time to strongly consider another profession. But wait - in the 1970s along comes the affordable digital calculator. Well now you can give your brain a bit of a break and simply punch the numbers into this miracle digital device and let it do that part of the work. However you would still need to make sure that the special journal or whatever is accurate and error free. In the case of a special journal this may involve cross adding numbers right to left and then top to bottom and then comparing the totals right to left to the totals top to bottom. So you now have a tool for number crunching but your work still requires quality control for data integrity.

Going into the 1980s along comes the PC and the electronic spreadsheet at an affordable price. At that time the talk was; the PC and software are going to replace the number crunchers and make accountants obsolete. Well accountants are still here and probably in record numbers. So what was wrong with the 1980s prediction that the new advanced technology would replace a historical profession. Well as it turned out; the PC and software are simply tools that allowed those in the accounting profession to become more efficient at what they do but not necessarily proficient. The electronic spreadsheets allowed accountants to do quasi software programming without much training. Basically all you needed was a bit of training in the software operation and some logic skills. You could then be very efficient at number crunching and it could actually be fun and challenging. However, along with the power of electronic spreadsheets comes much responsibility to ensure that those spreadsheets that can do complicated calculations in seconds produce accurate results. So you could make an inaccurate spreadsheet to calculate inaccurate results very fast. What evolved in number crunching was the efficiency mechanics not the responsibility to be proficient and produce accurate results. Number crunching went from sure brain power to electronic calculator to electronic spreadsheet but the responsibility for accuracy has never changed. No matter what method of number crunching is used, the accountant is still responsible for the accuracy of the results. Just because an electronic spreadsheet is used does not necessarily mean the results will be accurate. The modern day house builder now also has an array of power tools to make them more efficient but the home builder is still responsible for building a quality built house.

In this series of articles we will be discussing three basic components of a financial spreadsheet that can result in "spreadsheet errors" as was discussed earlier in this article.

  1. Source Data
  2. Formulas
  3. Spreadsheet Design

We will also be discussing some quality control methods.

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Last updated: May 4, 2022
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