Spreadsheet Compliance: Controlling The Risks And Costs

Spreadsheets are ubiquitous. Surveys have shown that as many as 95% of U.S. firms use spreadsheets for financial reporting. But the use of spreadsheets in the enterprise has taken on new importance. The Sarbanes-Oxley Act of 2002 has forced companies to examine the role spreadsheets play in their financial reporting processes as well as financial decisions based on the use of spreadsheets in such activities as forecasting and inventory management. The Act requires management to establish and maintain adequate internal controls and procedures for financial reporting and to assess the effectiveness of those controls.

It sounds simple. But the internal controls for the spreadsheets that collect and consolidate data for planning, budgeting and reporting are weak at best. Spreadsheets are, by definition, handled manually and prone to human error. Regardless of how well-defined and well-documented the rules are that produce the data, once those data are imported into a spreadsheet for further manipulation, control is lost and, with it, the ability to ensure accuracy. Some studies have uncovered errors in more than 90% of the spreadsheets audited.

These errors can have devastating consequences for the organization. Nevertheless, virtually every company – many relying on hundreds or even thousands of spreadsheets – recognizes that spreadsheets will continue to be the foundation of financial reporting. And virtually every company drives up costs by having an army of people check and re-check spreadsheets to ensure their accuracy.

This paper examines the implications of spreadsheet usage in light of compliance requirements and increasing scrutiny of corporate governance and demonstrates how to put in place effective controls for managing spreadsheets. It introduces ViewDirect-ABS for Spreadsheet Compliance, the first software solution that dramatically reduces the costs of eliminating errors and restores confidence in financial reporting by ensuring that spreadsheets are properly controlled, accessed and manipulated.