Risk of Spreadsheet Error

Risk of Spreadsheet Error

  • Submitted By: ednaxin
  • Date Submitted: 10/14/2009 10:24 AM
  • Category: Technology
  • Words: 1379
  • Page: 6
  • Views: 730

With the popularity use of computers, spreadsheets are used for decision making by more and more business managements. While spreadsheet packages such as Microsoft Excel are relatively inexpensive and easy to use, they have become everywhere on the executives computers. The researches show that these users often have little or no formal training in the use of spreadsheets to construct financial models, that leads the models contain errors, results misleading and inaccurate, and distorts the decision making process. That causes different influence in business, ranging from public embarrassment to millions loss.

As the research by Panko (2008) shows that the errors are pandemic and ineluctable on the worldwide use of the spreadsheets. The error rates are completely consistent from human activities and most large spreadsheets contain multiple errors. Even relatively small "scratch pad" spreadsheets, still have a significant probability of errors. Beaman, Ratnatunga, Krueger & Mudalige (2006) classify errors into two types, state that “Errors in spreadsheet models can be classified as “existing” (i.e. quantitative) or “potential” (i.e. qualitative) errors.” They also identify that quantitative errors can occur including logical errors, illogical or incomplete output reports, invalid assumptions incorporated into model logic or invalid data entered into the model. While many spreadsheet specialists argue that few spreadsheet users audit or check their spreadsheet models for “existing” errors after they finishing work, only fewer users recognize the “potential” errors associated with poor spreadsheet design, which leading the increased rate of existing errors (Beaman, Ratnatunga, Krueger & Mudalige, 2006). Due to the variety of errors in spreadsheet, this article will briefly introduce one error in both types of spreadsheets: logic errors (existing error) and poor model layout design (potential error) and the solutions relate to these two errors below.

One type...

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