2. To “Spreadsheet” Err is human A study by Coopers and Lybrand found 90% of all spreadsheets with more than 150 rows that it audited contained errors Research has shown that people are not only prone to make errors. They are only moderately good at correcting these errors. The high error rates in spreadsheets are not only possible, but also consistent with data on human error rates from other work domains. In general, the emerging theory argues that human beings are amazingly fast and flexible and can juggle multiple tasks and constraints. However, the same cognitive processes that allow them to work this way inevitably result in occasional errors.
4. Common causes of Errors Overconfidence by spreadsheet developers A Brown & Gould study found that 9 out of 9 experienced developer surveyed made at least one error when ask to build three spreadsheets. Insufficient time 18% of those surveyed said their project was rushed Lack of comprehensive policy for spreadsheet development Only 11% of respondents claimed to know of a comprehensive policy Reusing spreadsheets from past projects, especially spreadsheets authored by others
5. Techniques to Mitigate Errors Begin the development process with preliminary design and framework. Ballpark, Ballpark, Ballpark… Stress test spreadsheet and design safeguards, especially when building upon an earlier spreadsheet version Double-check your work, preferably let others audit your spreadsheets Define and follow comprehensive development guidelines and policies
6. Impact of Spreadsheet Errors "There was a big flap recently over Fidelity's Magellan fund estimating in November that they would make a $4.32/share distribution at the end of year, and then not doing so. A letter of explanation was sent to the shareholders (including me) from J. Gary Burkhead, the President of Fidelity, including the following pertinent items: "During the estimating process, a tax accountant is required to transcribe the net realized gain or loss from the fund's financial records (which were correct at all times) to a separate spreadsheet, where additional calculations are performed. The error occurred when the accountant omitted the minus sign on a net capital loss of $1.3 billion and incorrectly treated it as a net capital gain on this separate spreadsheet. This meant that the dividend estimate spreadsheet was off by $2.6 billion... Fannie Mae filed a Form 8-K/A with the SEC amending their third quarter press release to correct computational errors in that release. "There were honest mistakes made in a spreadsheet used in the implementation of a new accounting standard. The bottom line is that the correction has no impact on our income statement, but resulted in increases to unrealized gains on securities, accumulated other comprehensive income, and total shareholder equity (of $1.279 billion, $1.136 billion, and $1.136 billion, respectively)... the correction had to do with a computational error in performing complicated calculations required in the implementation of FAS 149."
