A financial spreadsheet is a computerized financial software application which shows various cell combined together in form of rows and columns on sheet. Each cell contains various numerical and alphabets. There also several formulas attached to ease the mathematical operations .Spread sheet has been extensively used in various sectors as a financial tool. It has aided many businesses, educational, medical research centre’s and even military field stations in analysis of statistical and accounting data. Invention of the spreadsheet as a financial and reporting tool dates back in 19 th century during invention of computer (Oldroyd, 2008). It had been observed that the financial calculator commonly used in financial analysis could not adequately accommodate large mathematical operations and hence spread sheet was designed to aid in solving the problem.
Although many financial analysts thought that spread sheet can only be used in drafting electronic data ledgers and financial statements worksheet like balance sheet and income statement. Most of the accountants and financial reporters only used spread sheet in drawing financial tables and graphs, but later the item came to be vital in designing and creating financial models. Other people in the sectors used spread sheet in summarizing, storing and recording various data’s collecting about a given companies problem (Bowman, 1998). The financial models are then used for making predictions or designing formulas for use in mathematical operations. Lastly, researchers use the model in inputting various research parameters collected.
Discovery and continuous use of the financial spread sheet model in United Kingdom was agitated by recent government supports and regulations put down by the international accounting standard. The main aim was to facilitate professional objectivity and integrity in financial sectors.Al though information technology was highly used in accounting field, one software use could not support all financial operations and thus the systems analyst were forced to devise new system software to ease financial reporting.Orgnizations financial structures kept on changing and becoming complex. Financial frauds were increasing at an alarming rate, creating gaps in the process. Most of the organizations decide to use spreads purposely to seal the gaps,
Spread sheets came to facilitate proper financial information collection, recording, summarization, analysis and interpretations. Organizations are currently in a position to predict and even forecast their future performance at ease, due to financial statements use.Mosts of the firms have adequately met their calculation financial roles out the use of various spread sheet models in the end of year financial statement preparations and analysis. More over use of the models have enabled the organization observe well the use of international accounting and financial reporting guidelines.
However, inorder for the organizations to achieve the above mentioned objectives.interna l auditors must adequately play a key role of helping the organizations accountants know how to use spread sheet models. They must ensure the organization pass the financial rules compliance test for quality stakeholders’ service delivery. Eventually, the auditor will also have an easy time of auditing the statements and provide to their clients and government quality financial reports for better decision making and taxation purposes. Government rely heavily on the information provided by the company’s internal auditor to set the taxes hence the report provided must be easy to understand, correct and comply fully with all accounting standard and guidelines. More over, the statements comparability is also boosted by use of the same methods of statements preparation, which includes use of the spread sheet.
According to International Accounting and Standard Board, many organizations uses spread sheets currently for several purposes. Most of the organizations face inevitable business regulations and never ending rules and regulations either from internal sources for instance employees’ strikes or externally from shareholders or the government. In order to meet the regulation and avoid future agency-principal conflicts, managers prefer the financial statements prepared using spread sheet models (Elliot, 2004). The models enables the financial users who may have little or no financial knowledge have an easy time in use and analysis of the financial statement. However, the International financial Reporting standard board (IFRSB) has called for several changes in the financial reporting standards which organizations are currently waiting to see and use but for now the only suitable and preferred accounting model is spread sheet. If organizations are going to replace spreadsheets, the executives may become reluctant as the more the spreadsheet models are used ,the more the accounting system become complex and costly .Secondly a lot of time will be used in the replacement process leading to poor financial performance.
In addition to that, most of the organizations find it secure to use the spread sheet models in data transaction between one information system and the other. This has helped the organization minimize information hacking by rivals. Professionalism and integrity of the whole information chains depends on the use of spreadsheet. Information’s gaps arising in various financial sectors have been drastically minimized since organizations started using these models. This has enabled the internal auditor adequately meet the set rules and regulations .the auditor must spend enough time in checking the authencity of the financial statements. He must give a written statement detailed with any fraudulent activity identified. More over, he must advise the management on any issue that he feels will enhance security of the organizations financial information. To understand the organization well, the auditor ensure he understands the roles of the spreadsheet well and how it’s applied in preparation of the financial statement. He should use the knowledge to identify any insecurity matter and bring it on board.
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Before the introduction of the spread sheet in accounting sector, most of the organization faced a lot risks. The executives had to accept these risks but today they can use the spreadsheet models to control the risks. Regulatory legislators has requested most of the executive managers to adequately document and implement the internal audit control measures to ensure that professionalism, objectivity and integrity of financial information. The managers are currently required to cooperate with internal auditor to ensure the spread sheet data are correct and up to date. Secondly the sheets should only be accessed by specified individuals only. The data entered should be properly checked through spread sheet calculations by the auditor to ensure all users get authentic information.
Once the auditor ensure that the managers and their employees have achieved integrity in the use and preparation of the financial statements, to ensure adequate of compliance government policies and international standard. Most of the firms currently use the technological advancements in financial sector to control uncertainties and ensure adequate compliance. The technological solutions can either be automated, where the rows and columns are easily identified and time saved (Romney, 2009). On the other hand, manual solutions can also be used but they have to be adequately audited in several times to ensure frauds and errors are few in the statements.
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In conclusion, all organizations must ensure that they use the spread sheet in the best way possible. This is because there are several limitations facing the use of the financial spreadsheet. They include frauds and error, most of the users of the information are not transparent to the whole firm and hence this reduces the integrity level.Lastly, spread sheet are very complex to operate and use in financial preparation. They consume a lot of time and thus discourage many users. To solve the problems, automated spreadsheet operations will help to minimize them as areas of risks are highly identified.