Spreadsheet Professional& Sarbanes Oxley

The world’s leading spreadsheet development and testing tool

Contact:Email: sales@spreadsheetinnovations.comWeb site: www.spreadsheetinnovations.com

The Sarbanes Oxley act mandates that a report is produced each year that testifies that adequate internal controls are in place for financial reporting…

Section 404

(a) Rules Required. The Commission shall prescribe rules requiring each annual report required by section 13(a) or 15(d) of the Securities Exchange Act of 1934 to contain an internal control report, which shall--   (1) state the responsibility of management for establishing and maintaining an adequate internal control structure and procedures for financial reporting; and   (2) contain an assessment, as of the end of the most recent fiscal year of the issuer, of the effectiveness of the internal control structure and procedures of the issuer for financial reporting.

(b) Internal Control Evaluation and Reporting. With respect to the internal control assessment required by subsection (a), each registered public accounting firm that prepares or issues the audit report for the issuer shall attest to, and report on, the assessment made by the management of the issuer. An attestation made under this subsection shall be made in accordance with standards for attestation engagements issued or adopted by the Board. Any such attestation shall not be the subject of a separate engagement.

Virtually all (all?) companies use spreadsheets in some part of the creation of their published accounts, and these spreadsheets can contain significant errors…

“ A single wrong figure on a spreadsheet forced Credit Suisse to markdown its profits by Swfr 200m (£86m).

The error came in the German subsidiary of the bank’s Winterthur arm, marking an embarrassing first year in charge for the insurer’s Lenny Fischer. It means … fourth-quarter income was lowered 16.7% to Swfr 1 billion…”

London Evening Standard 26th March 2004

We believe that spreadsheet errors are significantly underestimated by the business and IT community…

“The European Spreadsheet Risks Group lists 72 publicly reported errors of upto $1billion due to inadequate spreadsheets and/or spreadsheet controls. “http://www.eusprig.org/stories.htm

Both KPMG and Coopers & Lybrand have reported finding error rates of more than 90% in live spreadsheets.

"KPMG Management Consulting audited spreadsheets from over 21 major UK banking and financial organisations. 92% of the spreadsheets dealing with tax issues had significant errors, 75% had significant accounting errors, and 59% were judged to have poor design".

Academic studies (including ones using Spreadsheet Professional) regularly report 50% or more of spreadsheets containg ‘code errors’.

Our own experience mirrors the above. We are aware of several other significant spreadsheet errors that have not been reported in the press.

To meet the requirements of Sarbanes Oxley, therefore, we believe that there are three key requirements…

1. You must know the location of, and be able to control, your business critical spreadsheets and in particular those used for the creation of the companies financial results – both at the centre and in your company’s operating units.

2. These business critical spreadsheets must be comprehensively tested for errors, and both the spreadsheets and the tests on the spreadsheets documented to meet the requirements of SoX.

3. Training must be provided to those people creating and using business critical spreadsheets.

To meet these requirements therefore we believe organisations need…

1. A method of control. There are now a variety of vendors offering control packages for spreadsheets. – we work with a number of them to ensure compatibility of our products.

2. A method of testing and documenting the critical spreadsheets. Spreadsheet Professional, created in 1994, is the most established tool for performing such tests with, currently, 7000 clients worldwide.

3. Training of end users. We have teamed with AuditExcel to produce video training that can accompany the product to provide an introduction to spreadsheet best practice.

Spreadsheet Professional – How it helps meet the Sarbanes Oxley

Requirements.

Spreadsheet Professional has been developed as a powerful testing and documentation tool, following some key design principles…

Design principles

– To save the end user time and effort. SP has been designed so that its use saves the end user time, thereby encouraging its use.

– To be easy to use – It is designed as an addin for Excel driven by standard menus, so that it is familiar to end users.

– To not impact on the Spreadsheets tested. SP’s testing and documenting tools leave the original spreadsheet unchanged.

– To provide evidence of the tests and documentation performed. All tests and documentation are stored in separate workbooks.

– To be compatible with all versions of Excel and to work over a network, thereby easing issues of implementation and distribution.

– Its tools are divided into four sections: Build tools that encourage the use of spreadsheet design best practice, thereby reducing the probability of an error occurring. Testing tools to aid the identification of errors. Documentation tools to ensure that the organisation can understand the key assumptions and design of the spreadsheet

models. Usage tools – to encourage proper use of the spreadsheet models developed.

The Build tools - Setting up the spreadsheet correctly…

SP is driven by an easy to use menu

bar.

The Build tools are designed to

encourage best practice.

The Build tools - Setting up the spreadsheet correctly…

The standard format tool

ensures sources and units are

included.

The Build bar enables formatting and copying to be performed with a single key press.

The Build tools - Setting up the spreadsheet correctly…

The colour coding and formatting aids

understanding.

The translation bar provides instant translation into

English of formulas entered.

The Build toolsIt is possible to apply formatting retrospectively…

The spreadsheet painter enables

you to colour code a spreadsheet

after completion.

Testing toolsThe test tools apply tests against common errors…

The automated tests capture many

typical spreadsheet

errors.

Testing tools… and produce a comprehensive test report indicating where errors may have occurred.

As well as providing the list of cells, SP explains what to look for.

Documentation toolsThe tools are designed to provide easy understanding of a spreadsheet…

The summary report details the sheets used and basic data about the spreadsheet.

Documentation toolsThe tools are designed to provide easy understanding of a spreadsheet…

Something odd has happened

here.

The Map report identifies potential inconsistencies in

the development of the spreadsheet.

Documentation toolsThe tools are designed to provide easy understanding of a spreadsheet…

The translation report translates each formula into English for easy understanding.

Documentation toolsThe inputs report enables you to check all the inputs to a spreadsheet against the source data…

Documentation toolsThe formula tracer rapidly aids understanding of a spreadsheet…

Easy to understand printed documentation can

be quickly produced

This has proved the easiest way to understand how

formulas are calculated.

Usage toolsThe quick reports tool enables reports to be created very quickly…

The quick reports tool provides an easy mechanism for printing out

several reports at once.

Usage toolsThe comparison tool enables changes in spreadsheets to be spotted quickly…

The comparison tool enables you to check whether two spreadsheets are the same, and/or the differences

between two runs of the same spreadsheet.

Usage toolsThe sensitivity analyser enables you to identify what drives your results…

The sensitivity tool provides a range of outputs both graphical and

numerical showing how a target cell

varies when another cell is

changed.

Usage toolsThe sensitivity analyser and produce written reports…

SP is designed to provide hard copy

reports of all its outputs. These are created as

Excel workbooks so that they can be added to reports,

distributed electronically, or

printed out.

Summary

The world’s leading tool for the production of professional quality spreadsheets.

Ideal for the implementation of appropriate controls to meet the needs of Sarbanes Oxley.

Designed to radically reduce the time taken to build and use spreadsheets – and at the same time radically improve their quality.

Impacts all aspects of the Spreadsheet design, build, document, test and use.

Pays for itself the first time it is used.

Training

Whatever controls are implemented, we believe that the success of the implementation will be enhanced through the provision of end user training.

We have teamed with Audit Excel to provide a multimedia training package that can accompany Spreadsheet Professional.

The course consists of an introduction to using Excel…

Introduction (2 min)Brief introduction to the topic and using this training course

Auditing Toolbar (5 min)Loading and using the auditing toolbar which is a fundamental tool in Excel

1- Auditing Toolbar exercise Load the auditing toolbar and see how it helps to find errors in the spreadsheet.

Solution included in exercise

How Errors HappenIt is extremely easy to make errors in a spreadsheet. Below are some of the typical errors made. Look through the items you are familiar with:

Basic Functions

Copy and Paste (2 min) Inserting Rows (2 min) Inserting cells (1 min) Deleting cells (1 min) Hiding rows or columns of information (2min) Linking spreadsheets together (3 min)

Intermediate and advanced functions

IF functions (e.g. SUMIF) (3 min) VLOOKUP function (5 min) MIN and MAX functions (2 min) Referencing (absolute and relative) (2 min)

2- How errors happen Work through each example of the functions you use. When you get to the external links example open the following workbook.

3- More than one workbook

Work through the example to see what goes wrong when you work across workbooks.

… a comprehensive guide to how to use Spreadsheet Professional to review spreadsheets (this is just some of the sections)…

Getting Started with Spreadsheet Professional (3min)An introduction to Spreadsheet Professional ("SP") and the objectives of this part of the course Change the options as indicated in the introduction video. You can stop/ start the video to follow the precise steps.

4- Feedback template A template to use when documenting a review. Use it for the upcoming exercises.

The Spreadsheet Model review process (3 min)A high level overview of the spreadsheet review process and how spreadsheet professional assists in the task.A print out of the spreadsheet review process

Maps (4 min)How to use the Maps feature in SP.

5- Maps exercise

Run the maps on the 2 sheets in this workbook. Review the maps and look at the inconsistent areas. Document your findings on the feedback template. Tick off the formula that you have looked at on the map.

6-What your map should look like and where you should look Highlighted in red are the areas you should have reviewed and documented on the Feedback Template.

Prioritising the cells you look at (7 min)

Which cells to look at first to find the errors

7-Priority Exercise Run the test reports on the 2 sheets in this workbook. Review the report and look at the inconsistent areas. Document your findings on the feedback template. Tick off the formulae you look at on the maps.

8- What your report should look like What your report should look like.

9- Suggested findings after exercises After reviewing the maps and reports you should have found most of these.

… and a section on Spreadsheet design and advanced features of Excel

Good Spreadsheet Design (15 min)Basic concepts in designing spreadsheet models.

External Links (5 min)Handle links between spreadsheets using Excels inbuilt features.

21- External links exercise

22- Input Data v1

23- Input Data v2

Open these 3 files, view the external links and make the changes.

Find/ Replace (9 min)

Use this common Excel feature to help in reviews and find cells containing external links.

Use the files for the external links and find the stray link.

The GoTo Special Command (7 min)Learn how to use this brilliant tool to navigate your spreadsheet.

24- GoTo Special Exercise

Follow the instructions in the file.

The Function Wizard (3 min)

See what is already built into Excel.

25- Function Wizard Exercise

Follow the instructions in the exercise

… each section consists of video clips, exercises and worked examples…

Click on the picture to see an example video clip.

Next steps and any questions…