The number of CFOs and Finance executives that I have met, that proudly bragged about their global-reporting-“follow the sun”-mechanism of weekly online-shared spreadsheets, has convinced me to share with you some other views. The use of spreadsheets for financial reporting can introduce risks and vulnerabilities that may be exploited for fraudulent activities. Using spreadsheets for financial reporting can be a bit like leaving a jar of cookies unattended in a room full of hungry kids—it opens up the risk of some mischievous activities. Just like those mischievous kids, fraudsters might see spreadsheets as an opportunity to sneak in some unauthorized change and embezzle a few extra bucks.
Here are some common risks associated with spreadsheet-based financial reporting:
Lack of Transparency: Spreadsheets can lack transparency, making it difficult to track changes, identify unauthorized modifications, or understand complex formulas. This opacity creates opportunities for fraudsters to manipulate data without detection.
Weak Controls and Validation: Spreadsheets lack built-in validation checks and comprehensive control mechanisms. This absence increases the risk of fraudulent activities going undetected due to inadequate checks and balances.
Data Security Vulnerabilities: Spreadsheets are typically stored on individual computers or
shared drives, making them vulnerable to unauthorized access or data breaches. Fraudsters can exploit these vulnerabilities to gain access to spreadsheets, manipulate data, or even steal sensitive financial information.
Complexity and Lack of Documentation: Over time, spreadsheets can become complex, with numerous linked worksheets, macros, and formulas. Lack of proper documentation and understanding of the spreadsheet structure increases the risk of fraud schemes or errors going undetected.
Lack of Audit Trail: Spreadsheets lack features to support effective auditing and compliance. Auditors may face challenges in assessing the accuracy and completeness of financial information, allowing fraudulent activities to go unnoticed.
Lack of Automation: Manual processes in spreadsheets can be time-consuming and prone to errors. Lack of automation increases the risk of fraudulent activities going unnoticed, as there may be limited validation or verification mechanisms in place.
There are ways to protect yourself from these spreadsheet shenanigans.
Implement strong controls, use dedicated financial software
that knows how to guard the cookies, and don’t forget to regularly review and
reconcile the numbers. And of course, stay vigilant, keep an eye out for any
suspicious activity or drop us a note at hello@certomo.com