Have you ever been involved in a search so detailed and meticulous that it was like “looking for a needle in a haystack?” Literally and figuratively, the task of performing such a comprehensive search is nearly impossible and usually demands hours of manual labor.
This notion has become pervasive in the business world as companies depend on spreadsheets and workbooks to document and keep track of financials. While spreadsheets are intuitive, these cells are riddled with complex and intricate formulas and the task of pinpointing even one single error can be an incredibly daunting one.
In an article entitled “Interpretation as a Factor in Understanding Flawed Spreadsheets,” experts David A. Banks and Ann Monday noted “Spreadsheets appear to be a relatively intuitive tool that are perceived to be deceptively easy to use and although extensively used by organizations have often proved to be misleading at best and dangerous at worst.”
An amplified awareness of the challenges of spreadsheets, coupled with advancements in forensic accounting technologies, have given way to advanced techniques for mitigating these risks. For example, one financial services company regularly tasked with verifying financial data during the transition periods of start-up ventures, small businesses and companies faced such a challenge when an enterprise software company needed an “eye for detail” during an acquisition. To avoid having to manually weed through top-down and bottom-up spreadsheets, the financial services firm turned to Xcellerator, a spreadsheet error detection solution from Incisive, a company specializing in forensic accounting technology.
Using Xcellerator as an overlay to the spreadsheets, the partner spent a mere 90 minutes uncovering and amending an astounding 1,000 errors, resulting in nearly $20,000 saved on labor costs alone. Of course, deep within this “haystack” was the “needle,” in the form of one single cell that referenced an inaccessible external workbook.
While spreadsheets are one of the most brilliant and omnipresent software tools leveraged in the work environment, they are habitually peppered with fraudulent activity or material errors for several reasons, from comfort of use to latent reference links and formulas. Neglecting to uncover even one error can have an impact similar to a chain reaction, in which a single error will produce subsequent inconsistencies that most often go unnoticed.
“Even with thoughtful and careful calculation formula writing and subsequent quality control testing, there will be times when errors occur that only manifest themselves in certain situations,” wrote Richard Blaustein, president of Analytic Solutions, Inc., in a column on eliminating spreadsheet risks. “An error in one particular formula may be triggered only in certain circumstances, yet cause the model to produce incorrect results. In such a case, the dormant error occurs at some point after the quality control checks have already been completed, and as a result, the model produces incorrect results that may never be discovered.”
This is when a forensic accounting solution designed to detect spreadsheet inconsistencies and errors can be leveraged in order to diminish the frequency of material errors and potential fraud, as well as the laborious process of reviewing spreadsheets.
Xcellerator is the market leading spreadsheet analysis program from Incisive. Xcellerator is built to assist in the digestion of critical accounting reports by acting as an overlay to highlight all the data and formulas present within a spreadsheet file. It’s particularly helpful for forensic accountants in their task to detect errors and investigate fraudulent activities that lay deep within spreadsheets. As a result, Xcellerator significantly reduces material errors and potential fraud as well as the hours associated with manual spreadsheet analysis.
For more information on Incisive and Xcellerator’s capabilities, click here.
Tammy Wolf is a TMCnet web editor. She covers a wide range of topics, including IP communications and information technology. To read more of her articles, please visit her columnist page.
Edited by Rich Steeves