Spreadsheet Woes – Burden in SOX Compliance and Other Regulations

End User Computing (EUC) or end User Developed Application (UDA) systems like spreadsheets used to be ideal ad-hoc solutions for data processing and financial reporting. But those days are long gone.

Today, due to regulations like the:

  • Sarbanes-Oxley (SOX) Act,
  • Dodd-Frank Act,
  • IFRS (International Financial Reporting Standards),
  • E.U. Data Protection Directive,
  • Basel II,
  • NAIC Model Audit Rules,
  • FAS 157,
  • yes, there?s more ? and counting

a company can be bogged down when it tries to comply with such regulations while maintaining spreadsheet-reliant financial and information systems.

In an age where regulatory compliance have become part of the norm, companies need to enforce more stringent control measures like version control, access control, testing, reconciliation, and many others, in order to pass audits and to ensure that their spreadsheets are giving them only accurate and reliable information.

Now, the problem is, these control measures aren’t exactly tailor-made for a spreadsheet environment. While yes, it is possible to set up a spreadsheet and EUC control environment that utilises best practices, this is a potentially expensive, laborious, and time-consuming exercise, and even then, the system will still not be as foolproof or efficient as the regulations call for.

Testing and reconciliation alone can cost a significant amount of time and money to be effective:

  1. It requires multiple testers who need to test spreadsheets down to the cell level.
  2. Testers will have to deal with terribly disorganized and complicated spreadsheet systems that typically involve single cells being fed information by other cells in other sheets, which in turn may be found in other workbooks, or in another folder.
  3. Each month, an organisation may have new spreadsheets with new links, new macros, new formulas, new locations, and hence new objects to test.
  4. Spreadsheets rarely come with any kind of supporting documentation and version control, further hampering the verification process.
  5. Because Windows won’t allow you to open two Excel files with the same name simultaneously and because a succession of monthly-revised spreadsheets separated by mere folders but still bearing the same name is common in spreadsheet systems, it would be difficult to compare one spreadsheet with any of its older versions.

But testing and reconciliation are just two of the many activities that make regulatory compliance terribly tedious for a spreadsheet-reliant organisation. Therefore, the sheer intricacy of spreadsheet systems make examining and maintaining them next to impossible.

On the other hand, you can’t afford not to take these regulations seriously. Non-compliance with regulatory mandates can have dire consequences, not the least of which is the loss of investor confidence. And when investors start to doubt the management’s capability, customers will start to walk away too. Now that is a loss your competitors will only be too happy to gain.

Learn more about our server application solutions and discover a better way to comply with regulations.

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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Spreadsheet Risk Issues

It is interesting to note that the riskiness of operational spreadsheets are overlooked even by companies with high standards of risk management. Only when errors amount to actual losses do they realize that these risks have been staring them in the face all along.

Common spreadsheet risk issues

Susceptibility to trivial manual errors

Due to the fundamental structure of spreadsheets, a slight change in the formula or value in any of their inhabited cells may already affect their overall output. An

  • accidental copy-paste,
  • omission of a negative sign,
  • erroneous range selection,
  • incorrect data input or
  • unintentional deletion of a character,cell, range, column, or row

are just some of the simple errors spreadsheet users frequently encounter. Rarely are there any counter-checking controls in place in a spreadsheet-based activity and manual errors therefore easily go undetected.

Possibility of the user working on the wrong version

How do you store spreadsheet files?

Since the most common reports are usually generated on a monthly basis, users tend to store them using variations of these two configurations:

spreadsheet storage

If you notice, a user can accidentally work on the wrong version with any of these structures.

Prone to inconsistent company-wide reporting

This happens when a summary or ?final? spreadsheet is fed information by different departments coming from their own spreadsheets. Even if most of the data in their spreadsheets come from one source (the company-wide database), erroneous copy-pasting and linking, or even different interpretations of the same data can result to contradicting information in the end.

Often defenceless against unauthorised access

Some spreadsheets contain information needed by various individuals or department units in an organisation. Hence, they are often shared via email or through shared folders in a network. Now, because spreadsheets don’t normally use any access control, any user can easily open a spreadsheet file and view or modify the contents as he wishes.

Highly vulnerable to fraud

A complex spreadsheet system with zero or very minimal controls provides the perfect setting for would-be fraudsters. Hidden cells with malicious formulas and links to bogus information can go unnoticed for a long time especially if the final figures don’t deviate much from expected values.

Spreadsheet risk mitigation solutions may not suffice

Inherent complexity makes testing and logic inspection very time consuming

Deep testing can uncover possible errors hidden in spreadsheet cells and consequently mitigate risks. But spreadsheets used to support financial reporting are normally large, complex, highly-personalised and, without ample supporting documentation, understandably hard to follow.

No clear ownership of risk management responsibilities

There?s always a dilemma when an organisation starts assigning risk management responsibilities for spreadsheets. IT personnel believe users in the business side of the organisation should be responsible since they are the ones who create, edit, store, duplicate, and share the spreadsheet files. On the other hand, users believe IT should be responsible since they have always been in-charge of managing IT infrastructure, applications, and files.

To get rid of spreadsheet risks, you’ll have to get rid of spreadsheets altogether

One remedy is to have a risk management activity that involves both IT personnel and spreadsheet users. But wouldn’t you want to get rid of the complexity of having to distribute the responsibilities between the two parties instead of just one?

Learn more about Denizon’s server application solutions and how you can get rid of spreadsheet risk issues.

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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The Cloud: Changing the Game for Small Businesses

There is a consensus among cloud experts that the onset of cloud computing will benefit small organisations the most. In fact, many even go as far as saying that the cloud and small businesses are a match made in IT heaven. How much of this is true and how much of this is merely part and parcel of the hype surrounding cloud computing?

The Cloud as the Great?Equaliser

If you closely examine the essential characteristics of cloud computing, particularly public cloud services, you will see why small organisations would be very interested in the cloud, and would eventually flock to it, like moths to a flame. And why not? Cloud computing is turning out to be the weapon that can allow small and medium organisations to compete on a more level playing field against large enterprises.

Here are some cloud computing benefits that may just close the gap between the two.

  • Significantly lower IT spending. With little to no investment at all on hardware infrastructure and practically zero maintenance costs, SMBs that would have required substantial capital for IT are now finding it easy to get a business started from scratch or develop and test out new products by using the cloud as the backbone of their IT set-up. The pay-as-you-go pricing scheme that cloud computing offers allows companies to start small and scale up as needed, or when the revenue starts coming in.
  • Higher employee productivity. Licensing fees for software applications can run high even if you don’t have a large staff. Good thing there are now a host of cloud-based office tools – word processors, spreadsheets, presentations, accounting systems, etc. – that can boost employee productivity without the corresponding costs that small businesses can ill afford. Plus, team members in remote locations can continue to collaborate with the rest through any internet-connected device in real time.
  • Easier, better communication. The easy accessibility of communication apps has also changed the way employees interact with fellow employees and more importantly, with customers. Whether through email, instant messaging, or social networks, cloud services have given individuals and businesses more ways of giving and getting feedback. The best thing about it is that most of these services don’t cost much or are even free, giving SMBs ample tools to create better products and improve service.
  • A Look at the Figures Many small businesses are already seeing the potential in the cloud, with SaaS (Software as a Service) applications most commonly used among the early adopters. These services include email and other communication apps, file sharing, and backup.

In a February 2012 Edge Strategies survey (commissioned by Microsoft) of 3,000 small businesses in the US, the following data came to light:

  • The number of small companies with 2 to 10 employees using paid cloud services will triple in the next three years;
  • Current cloud users report purchasing an average of 4 services in the cloud now and expect to use 6 in the future;
  • Fifty percent agree that cloud computing is going to become more important for businesses such as theirs.

Further, a survey of 323 SMBs recently released by social business site Spiceworks and sponsored by EMC reveals that from 48 percent at the start of 2012 and 28 percent a year ago, 62 percent of the businesses surveyed now use some type of cloud app.

What these numbers show is that cloud adoption among small and medium enterprises is starting to gain ground and for sure, more will do the same as understanding and awareness increase. Yes, these businesses should still perform their due diligence as there is no one-size-fits-all cloud solution. But for those companies who have managed to find the right cloud apps and services for their needs, it’s all sunny skies up ahead.

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Directions Hadoop is Moving In

Hadoop is a data system so big it is like a virtual jumbo where your PC is a flea. One of the developers named it after his kid?s toy elephant so there is no complicated acronym to stumble over. The system is actually conceptually simple. It has loads of storage capacity and an unusual way of processing data. It does not wait for big files to report in to its software. Instead, it takes the processing system to the data.

The next question is what to do with Hadoop. Perhaps the question would be better expressed as, what can we do with a wonderful opportunity that we could not do before. Certainly, Hadoop is not for storing videos when your laptop starts complaining. The interfaces are clumsy and Hadoop belongs in the realm of large organisations that have the money. Here are two examples to illustrate the point.

Hadoop in Healthcare

In the U.S., healthcare generates more than 150 gigabytes of data annually. Within this data there are important clues that online training provider DeZyre believes could lead to these solutions:

  • Personalised cancer treatments that relate to how individual genomes cause the disease to mutate uniquely
  • Intelligent online analysis of life signs (blood pressure, heart beat, breathing) in remote children?s hospitals treating multiple victims of catastrophes
  • Mining of patient information from health records, financial status and payroll data to understand how these variables impact on patient health
  • Understanding trends in healthcare claims to empower hospitals and health insurers to increase their competitive advantages.
  • New ways to prevent health insurance fraud by correlating it with claims histories, attorney costs and call centre notes.

Hadoop in Retail

The retail industry also generates a vast amount of data, due to consumer volumes and multiple touch points in the delivery funnel. Skillspeed business trainers report the following emerging trends:

  • Tracing individual consumers along the marketing trail to determine individual patterns for different demographics and understand consumers better.
  • Obtaining access to aggregated consumer feedback regarding advertising campaigns, product launches, competitor tactics and so on.
  • Staying with individual consumers as they move through retail outlets and personalising their experience by delivering contextual messages.
  • Understanding the routes that virtual shoppers follow, and adding handy popups with useful hints and tips to encourage them on.
  • Detecting trends in consumer preferences in order to forecast next season sales and stock up or down accordingly.

Where to From Here?

Big data mining is akin to deep space research in that we are exploring fresh frontiers and discovering new worlds of information. The future is as broad as our imagination.?

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