Financial Fraud Undetected in Excel Financial Statements

By SST Partner, Becky DaVee, CPA

If your accountant prepares financial statements using Excel – my primary question is WHY? I currently work with 3 clients who generate monthly financial statements using Excel worksheets. Information is extracted from operating and accounting platforms and then manipulated in Excel.

This is a dangerous process and a slippery slope. WHY?  If no one reconciles the financial data to the accounting/financial module – then no one can detect if manual adjustments have been posted to present different results. The following are 3 examples of why this is a “no/no”!

Client #1 – A manual adjustment was posted through Excel that overstated assets and net income. No one reconciled the manual financial statements to the general ledger and therefore financial fraud went undetected.

Client #2 – The finance committee was only seeing financial data that was important to the Treasurer. The committee repeatedly asked for a balance sheet – but the Treasurer didn’t comply.

Client #3 – Financial reports created for executive management external to the accounting platform creates additional labor to extract, manipulate, update, review and edit for executive decisions. Time and money is wasted if an error is uncorrected and not discovered on a timely basis.

In all three situations above – internal control weaknesses were identified by our consulting team and have now been reported to the executive board. In this recent WSJ article – CFOs from several companies including P.F. Chang’s China Bistro Inc., ABM Industries Inc., and Wintrust Financial Corp are reducing how much their finance teams use Excel for financial planning, analysis, and reporting. “Finance chiefs say the ubiquitous spreadsheet software that revolutionized accounting in the 1980s hasn’t kept up with the demands of contemporary corporate finance units. Errors can spread when data in Excel is separated from other systems and isn’t automatically updated.

Why manipulate financial data for the end user?  USER BEWARE!! If you must create or manipulate financial data external to your accounting platform because your software is archaic and needs to be replaced – call me. Intacct can provide the solution to your accountants manipulating tactics!