The short answer is no. Spreadsheets are probably the most commonly used business application and they are invaluable. From the smallest corner shop to the largest of corporations they are used for everything from investment appraisal, cash flow, preparing accounts, bank reconciliations and future planning to name but a few.

spreadsheets
spreadsheets

However, they are easily manipulated. A formulae cell can be changed to a number, “balancing entries” can easily be concocted and the numbers can be made to portray an inaccurate story. Complex Ponzi schemes often use this simplest of tools to generate that convincing “15% return” . If you are relying on a spreadsheet produced by others it is crucial to review with professional skepticism. Some of the steps to provide assurance and a degree of comfort include:

Step 1: Define Objectives and Scope

Before starting the verification and audit process, clearly define the objectives and scope. Identify the purpose of the spreadsheet, its intended use, and the critical data it contains. Understanding the context helps determine which areas to focus on during the audit.

Step 2: Review Documentation

Check for any existing documentation related to the spreadsheet. This may include user manuals, data dictionaries, or process documents. Understanding the spreadsheet’s structure, formulas, and assumptions is crucial for a thorough audit.

Step 3: Examine Data Inputs

Verify the accuracy and completeness of data inputs. Ensure that all necessary data sources are included and up-to-date. Review the data entry process to identify potential errors or inconsistencies.

Step 4: Validate Formulas and Calculations

Review all formulas and calculations to ensure accuracy. Check for formula errors, circular references, and inconsistencies in calculations. Utilize Excel’s auditing tools, such as tracing precedents and dependents, to identify and resolve formula issues.

Step 5: Check Spreadsheets Formatting and Presentation

Evaluate the formatting and presentation of the spreadsheet. Ensure consistency in formatting, including fonts, colors, and cell styles. Pay attention to alignment and layout to enhance readability and usability.

Check for external references and links to other workbooks or datasets. Verify that linked data is accurate and up-to-date. Update links if necessary and resolve any broken links or missing references. In particular links to other worksheets can pose a risk. Assessing any dependencies is also critical. Software programs do exist to facilitate this process.

Step 7: Perform Data Validation

Implement data validation checks to ensure data integrity and consistency. Use Excel’s data validation feature to enforce rules and restrictions on data entry. Validate data against predefined criteria to identify errors or anomalies.

Step 8: Look for Hidden Columns and Rows

Hidden columns and rows can be useful to tidy up a spreadsheet but they can also be used to hide awkward or even misleading information.

Step 9: Document Findings and Recommendations

Document the audit findings, including any errors, issues, or areas of concern. Provide recommendations for improvements or corrective actions. Maintain comprehensive audit documentation for future reference and review.

By following these steps, you can systematically verify and audit an Excel spreadsheet to ensure accuracy, reliability, and compliance with standards. Effective spreadsheet auditing not only reduces the risk of errors but also enhances data integrity and decision-making processes.

Remember to adapt these steps based on the specific requirements of your organization and the complexity of the spreadsheet being audited. Regular audits are essential to maintaining data quality and ensuring ongoing compliance with standards and regulations. The business owner should be documenting critical spreadsheets.

Step 10: Mission Critical?

If the spreadheet is mission critical (e.g. key contacts or evidence for tax and reporting) is it backed up and secure? If the spreadheet is critical it is fair to ask whether a more robust system should be used. THE AUDIT TRAIL FOR SPREADSHEETS IS INHERENTLY WEAK – IT IS DIFFICULT TO TRACK WHO IS MAKING CHANGES WITH A DEGREE OF RELIABILITY. Spreadsheet security is easier to compromise than an accounting system.

Spreadsheets: Can We Rely on Them?

When it comes to critical data management, it’s crucial to question the trustworthiness of spreadsheets. The inherent weakness of their audit trail raises concerns about reliably tracking changes and identifying responsible parties. In fact, spreadsheet security is more susceptible to compromise compared to dedicated accounting systems. As a solution, consider leveraging software that specializes in validating spreadsheets, such as the insightful program found at https://spreadsheetsoftware.com/review-audit-software/. In my opinion, to ensure long-term reliability and sustainability, minimizing the use of spreadsheets for key tasks and embracing software with robust audit trails is the wiser choice.