How Internal Auditors can win The War against Spreadsheet Fraud

To prevent another round of million dollar scandals due to fraudulent manipulations on spreadsheets, regulatory bodies have launched major offensives against these well-loved User Developed Applications (UDAs). Naturally, internal auditors are front and center in carrying out these offensives.

While regulations like the Sarbanes-Oxley Act, Dodd-Frank Act, and Solvency II can only be effective if end users are able to carry out the activities and practices required of them, auditors need to ascertain that they have. Sad to say, when it comes to spreadsheets, that is easier said than done.

Because spreadsheets are loosely distributed by nature, internal auditors always find it hard to: locate them, identify ownership, and trace their relationships with other spreadsheets. Now, we’re still talking about naturally occurring spreadsheets. How much more with files that have been deliberately tampered?

Spreadsheets can be altered in a variety of ways, especially if the purpose is to conceal fraudulent activities. Fraudsters can, for instance:

hide columns or rows,
perform conditional formatting, which changes the appearance of cells depending on certain values
replace cell entries with false values either through direct input or by linking to other spreadsheet sources
apply small, incremental changes in multiple cells or even spreadsheets to avoid detection
design macros and user defined functions to carry out fraudulent manipulations automatically

Recognising the seemingly insurmountable task ahead, the Institute of Internal Auditors released a guide designed specifically for the task of auditing user-developed applications, which of course includes spreadsheets.

But is this really the weapon internal auditors should be wielding in their quest to bring down spreadsheet fraud? Our answer is no. In fact, we believe no such weapon has to be wielded at all?because the only way to get rid of spreadsheet fraud is to eliminate spreadsheets once and for all.

Imagine how easy it would be for internal auditors to conduct their audits if data were kept in a centralised server instead of being scattered throughout the organisation in end-user hard drives.

And that’s not all. Because a server-based solution can be configured to have its own built-in controls, all your data will be under lock and key; unlike spreadsheet-based systems wherein storing a spreadsheet file inside a password-protected workstation does not guarantee equal security for all the other spreadsheets scattered throughout your company.

Learn more about Denizon’s server application solutions and discover a more efficient way for your internal auditors to carry out their jobs.

More Spreadsheet Blogs

Spreadsheet Risks in Banks

Top 10 Disadvantages of Spreadsheets

Disadvantages of Spreadsheets – obstacles to compliance in the Healthcare Industry

How Internal Auditors can win the War against Spreadsheet Fraud

Spreadsheet Reporting – No Room in your company in an age of Business Intelligence

Still looking for a Way to Consolidate Excel Spreadsheets?

Disadvantages of Spreadsheets

Spreadsheet woes – ill equipped for an Agile Business Environment

Spreadsheet Fraud

Spreadsheet Woes – Limited features for easy adoption of a control framework

Spreadsheet woes – Burden in SOX Compliance and other Regulations

Spreadsheet Risk Issues

Server Application Solutions – Don’t let Spreadsheets hold your Business back

Why Spreadsheets can send the pillars of Solvency II crashing down

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Saving Energy Step 1 ? Implementing a Management System

There has been much hype down the years regarding whether management is art or science. Thankfully, where people are concerned the pendulum has swung away from standard times in sweatshops in the west. However, when it comes to measuring physical things like harvest per square meter and the amount of energy consumed there is no substitute for scientific measurement, and this implies a system.

Managing energy cost and consumption down is like any other strategy. American engineer / statistician / management consultant W. Edwards Demming may have passed on in 1993. However he was as right as ever when he said:

When people and organizations focus primarily on quality, this tends to increase and costs fall over time.

However, when people and organizations focus primarily on costs, costs tend to rise and quality declines over time.

Demming believed that 90% of organizational problems arise from systems we put in place ourselves. This can be because we are so accustomed to them that we fail to notice when they are no longer relevant. The currently prevailing laissez faire towards energy is a case in point. What is managed improves and what is not, deteriorates. We know this. Let us take a look at how to apply this principle to energy management.

First, you need to get the subject out the closet and talk about it. How often do you do this is your boardroom, and how does energy rank against other priorities? Good governance is about taking up a position and following through on it. Here is a handy checklist you may like to use.

Do we use a consistent language when we talk about energy? Is it electricity, or carbon emitted (or are we merely fretting over cost).

How well engaged are we as a company? Looking up and down and across the organization are there points where responsibility stops.

How well have we defined accountability? Do we agree on key performance areas and how to report on them.

Are we measuring energy use at each point of the business? When did we last challenge the assumption that ?we’re doing okay?.

Have we articulated our belief that quality is endless improvement, or are we simply chasing targets because someone says we should.

A management system is a program of policies, processes and methods to ensure achievement of goals. The next blog focuses on tools and techniques that support this effort.

Do you really need a Cloud Broker?

A cloud broker is someone who can serve as your trusted adviser when it comes to your dealings with a cloud service provider. Sort of an IT consultant who: is familiar with cloud computing, can negotiate a mutually beneficial relationship between you and a provider, and help you manage usage, performance and delivery of cloud services.?But do you need one?

Is it even time for cloud adoption?

Of course, if you haven’t even started considering moving your IT systems to the cloud, what’s the point of reading this article, right? Well, if you’re running a business in Ireland or the UK maybe you should start thinking about it. The benefits (of moving to the cloud) are simply overwhelming. But then that’s for another post.

For now, let’s just briefly talk about the rate of cloud adoption so far. This should give you an idea what other decision makers nearby think about cloud computing and what they’ve done in this regard so far.

According to research conducted by the Cloud Industry Forum (CIF), the number of first-time users of cloud computing in the United Kingdom has risen by about 27% compared to last year.

The study, which was carried out by research company Vanson Bourne and which involved IT decision-makers from both the private and public sector in UK, also showed that 61% of companies are subscribing to cloud-based services. A similar research conducted last year (2011) revealed only 48%.

In Ireland, plans are underway to adopt cloud computing. According to Pricewaterhouse Coopers, 75% of Ireland’s CIOs and IT directors are already adopting a cloud computing strategy.

Definitely, the number of cloud adopters is growing. If that number already includes your hottest competitor, then perhaps there’s no time to waste.

But while a migration to the cloud should be in your pipeline, it shouldn’t be something you should rush into. Generally speaking, there are at least three kinds of services offered by cloud service providers: IaaS (Infrastructure as a Service), PaaS (Platform as a Service), and SaaS (Software as a Service).

Some providers offer variations of these services. You might only need one type of service or a little of everything. There are also technical and regulatory compliance issues that need consideration.

Obviously, if you have no idea where or how to start, you’ll need someone who can help you. But what kind of help do you need?

Let’s proceed by talking about the kinds of services cloud brokers offer as these are obviously indicative of the needs of current cloud customers.

What cloud brokers do?

Cloud brokers offer three main types of services.

Cloud?inter-mediation

Cloud inter-mediation services are designed to add value to existing services and improve capabilities. ?Examples of cloud inter-mediation include managing access to cloud-based services, carrying out performance reporting, and establishing stronger security.

Cloud aggregation

As mentioned earlier, some cloud customers may end up subscribing to multiple cloud services; most likely from different cloud service providers. To get optimal return on their various cloud subscriptions, these customers will need to apply data integration and make these disparate systems work together. They will also have to make sure data flowing from one system to another is kept secure. This is where cloud aggregation comes into play.

Cloud arbitrage

This entails finding the best cloud service provider(s) to solve a particular problem. One example is comparing different providers offering data storage services and identifying the one offering the most competitive rates.

Other cloud arbitrage brokers develop new solutions by combining the services of different cloud service providers and then offer them to cloud customers. While there are similarities between cloud arbitrage and cloud aggregation, the former is more flexible and allows the customer to transfer from one provider to another where conditions are more favourable.

Problems a cloud broker can help you solve

Just like with natural clouds, your experiences in cloud computing won’t be all white and fluffy. You’ll also encounter gray and uncertain (or even stormy) clouds.

One major issue in cloud computing is cloud security. In fact, cloud security (or the apparent lack of it) is the one thing that’s really clouding up the sky of cloud computing. But that doesn’t mean the cloud is totally insecure. Besides, there are certain types of information that really don’t require a high level of security. These types you can easily migrate to the cloud.

For sensitive information, you really need to conduct due diligence to make sure your cloud service providers’ data centres are secure enough.

Where exactly will your data be stored? Are there enough provisions for regulatory compliance? How will your data be segregated? Does the infrastructure readily support ?data forensics? Is there a sound disaster recovery/business continuity plan? These are just some of the questions that need clear answers before you sign a contract with a cloud service provider.

Also, before you sign, you need to study the SLA (Service Level Agreement) very carefully. Look at the guaranteed uptime. Is it enough to meet your own desired service levels?

Bear in mind that the answers to these questions may be too technical. This is one of those instances when a cloud broker can come in handy. As your trusted adviser, your cloud broker can break down the technical jargon and present everything in a language that you can make intelligent decisions from.

A cloud broker will also be able to study the cloud provider’s security architecture and policies and determine whether they’re sufficient to meet your own security requirements. Basically, a cloud broker will not only help you obtain answers to your questions.

He will also know exactly what vital information to extract from providers in order to ensure that you find the best deal possible.

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Article 8 of the EU Energy Efficiency Directive ? Orientation

Following in-depth discussion of the UK?s ESOS response, we decided to backtrack to the source, especially since every EU member is facing similar challenges. The core purpose of the directive is to place a pair of obligations on member states. These are

To promote the availability of energy audits among final customers in all sectors, and;
To ensure that enterprises that are not SMEs carry out energy audits at least every four years.

Given the ability for business to look twice at every piece of legislation it considers unproductive, the Brussels legislators took care to define what constitutes an enterprise larger than an SME.

Definition of a Large Undertaking

A large undertaking meets one or both of the following conditions:

It employs 250 or more people
Its annual turnover is more than ?50 million and its balance sheet total exceeds ?43 million

Rules for Energy Audits

If accredited / qualified in-house specialists are unavailable then independent experts should supervise audits. The talent shortage seems common to many EU businesses. In hindsight, the Union could have ramped up slower, especially since the first compliance date of 5 December 2015 does not leave much swing room.

ecoVaro doubts there was a viable alternative, given the urgent imperative to beat back the scourge of carbon that is threatening the viability of our planet. The legislators must have been of a similar mind when laying down the guidelines. Witness for example the requirement that penalties be ?effective, proportionate and dissuasive?.

In order to be compliant, an energy audit must

Be based on twelve months of verifiable data that is
- over a continuous period beginning no more than 24 months before the beginning of the energy audit, and;
- identifies energy saving opportunities including paths to their achievement
Analyse the participant’s energy consumption and energy efficiency
Have not been used as the basis for an energy audit in a previous compliance period

Measurement of current status and progress tracing are at the core of energy saving and good governance generally. EcoVaro has a powerhouse of software tools available on the cloud to help project teams save time and money.