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Spreadsheet Good Practise

 

Introduction

Today many businesses rely on reports or information produced by personal computer applications such as Microsoft's Excel. As a tool it's a very handy product, sometimes described as the Swiss Army Knife of business. Because of its adaptability it has found its way into all corners of business life. But like all tools it has to be used properly, and if it's not, then your business could be at risk.

I have been specialising in spreadsheet development for a number of years. I have worked in many organisations but I have never seen any generally accepted standards for documenting small system developments, such as those based on Excel and Access. As a matter of course I have documented my work and this paper will describe some of the methods I have used and others of which I am aware.

Many organisations recognise the lack of documentation relating to spreadsheets within both the development and production stages. Regulators are now demanding that all processes, including those involving spreadsheets, are documented to an adequate standard. Sarbanes Oxley requires that all spreadsheets should have sufficient documentation to enable an independent person to understand and use the spreadsheet model. Whilst the United Kingdom’s (UK) Financial Services Authority (FSA) is requiring documentation to a level so that “a knowledgeable, professional, financially aware person with ... modelling experience [could rebuild its] model based on the documentation” [Rxx001].

Documentation is not a popular topic within the spreadsheet domain. This article will make some suggestions as to why that might be the case.

To aid understanding of the background some of the available methods of documenting software are discussed in the appendices.

This paper will address the issue of documentation with proposals to help improve the current culture. It will suggest a set of core proposals on how to document spreadsheets which can be extended as required. The initial research has indicated that there appear to be no generally accepted methods in existence, so this paper brings together some of the more popular suggestions.

 

Background

“Spreadsheets offer the flexibility and ease of use of a desktop application, combined with the power to perform complex data analysis. As a result, spreadsheets are used to support critical business processes in most organizations ...  research indicates that over half of financial management reporting is performed with spreadsheets. Despite this, a disparity exists between the importance of spreadsheets to business processes and the level of corporate resources devoted to spreadsheet development, testing, and maintenance.

Organizations today are under considerable regulatory pressure to ensure that financial reporting processes are both transparent and well-documented. Three visible examples of such legislation are the Sarbanes-Oxley Act (United States, 2002), the Data Protection Act (European Union, 1998), and the Basel Capital Accord (Basel II, 2006), which together impact most publicly-traded companies around the world.

Microsoft 2007

Spreadsheets have never been well-documented, but now that regulators demand it industries and organisations are beginning to take the subject seriously. The End User Computing (EUC) issue has come to the fore after the introduction of compliance legislation such as SOX and the heightened vigilance of auditors [Alliy & Brown, 2008]

Through Solvency II, the need for strengthened requirements on capital adequacy and risk management, the insurance industry is being expected to ensure that all its processes and procedures are adequately documented [Ref023] so that “a knowledgeable, professional, financially aware person with capital modelling experience [could rebuild its] model[s] based on the documentation”.  The FSA does not define the limitations of the models, so it would seem to be fair to should proceed on the basis that anything impacting on the models is within the FSA’s scope.

 
[References to books and papers will be updated soon]

 

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Published: 22-August-2011
Last edited: 21-Aug-2012 16:44