When spreadsheet risks are evaluated, it is usually in connection with preparing or reviewing. However, in many cases, accountants need to pluck data out of spreadsheets created by others, which carries unique risks. Listed below are 5 such risks.
- Output received is flat out wrong – An example is asking HR for headcount information for a specific division and receiving it (in a spreadsheet) for the entire company. Accountants need to be on the lookout as this occasionally occurs.
- A good mitigation technique is to ask for query parameters along with the data (when applicable).
- Not all formulas in the spreadsheet received are populated – An example is with a derivative spreadsheet received from the treasury group. There were 2,000 derivative trades, but only 1,902 fair value calculations were populated with the remaining 98 fair value formula calculations missing. Thus, the fair value total cell was incorrect.
- Accountants need to review spreadsheets to ensure that formulas are consistent and complete for all rows/columns.
- YTD not refreshed – An example was a senior accountant updated the MTD portion of a fixed asset roll forward, but the YTD cells were not refreshed. The cash flow preparer, who received the file from the senior accountant (for investing outflow on cash flow statement) missed that YTD calculation was not refreshed/correct and under reported the fixed asset investing outflow.
- Accountants need to review spreadsheets to ensure that MTD refreshes to YTD.
- Tie out issues – An example is when Treasury submits a detailed cash activity spreadsheet to be included in the monthly internal management package. However, ending cash on the treasury report does not equal ending cash per the balance sheet.
- The internal management report preparer should catch the tie out error and sort it out before completing.
- Misleading labels – Within the “interest payable” account reconciliation, the label “interest payments” should be labeled as “interest expense” as it includes both cash-paid and non-cash interest expense.
- Although the “interest payable” components are correct within the reconciliation, the accountant who accesses this reconciliation to pluck out data for a “cash interest paid” schedule needs to recognize that the “interest payment” label is misleading.
Consequently, accountants must not only focus when preparing or reviewing spreadsheets, but, also focus when plucking data out of spreadsheets created by others. In other words, “pay attention to detail” while concurrently “stepping back and looking at the big picture.”
For more information about the most common spreadsheet risks that plague accountants, see www.pm4secr.com and consider purchasing “The Industry Accountant’s Intelligence Briefing” through Amazon at http://www.amazon.com/Industry-Accountants-Intelligence-Briefing-Trenches/dp/1634135008/ref=sr_1_1?ie=UTF8&qid=1432663820&sr=8-1&keywords=9781634135009.