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.
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
https://edtechmagazine.com/k12/article/2012/11/calculating-firsts-visual-history-calculators.
The evolution of the electronic spreadsheet can be traced in an article at
https://excel.officetuts.net/training/history-of-spreadsheets/. 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.
We will also be discussing some quality control methods.