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Hidden Excel Columns: Who’s Negligent?

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The Management Blog at the Financial Times has an interesting post on a recent SEC complaint and subsequent settlement. The gentleman who settled was said to have covered up his work (normally checked via printed versions of spreadsheets) by using white text on white backgrounds and hiding columns.

The meat of it:

The SEC claimed that Mr Hirth – whose lawyer declined to comment this afternoon – exploited the fact that accounting checks used printed copies of spreadsheets rather than on-screen versions. It alleged that Mr Hirth used a “hide” function on his spreadsheet program that meant certain fictitious entries were invisible when printed.

In another spreadsheet, the SEC claimed, the company’s running tally of expenditure on commissions was distorted by a $4.1m cell entry located well away from the other figures. Because it was in white font on a white background, this entry – which had no basis, according to the SEC – could not be seen when a hard copy of the spreadsheet was printed.

This is interesting. Yet another addition to an auditor’s constant need to look for reasonableness of materials. All auditors should still foot any column and subtotal any row of numerical information submitted by a client. They also look for entries on non-business days (such as Christmas Day, New Years Day, Independence Day, etc.), strings of zeros (“000’s”) and other simple-looking numbers that normally don’t appear in business. Now auditors (and anyone reviewing financial work) should be selecting the entire worksheet and setting all of its text to black. Double-checking formulas may not be out of the question.

The comments, as in many financial blogs, are filled with good commentary. Most notably from Grenville Croll, EuSpRIG Chair, who lists a number of helpful links:

You can find ways to avoid spreadsheet risk if you look at the non-profit European Spreadsheet Risks Interest Group (

EuSpRIG offers Risk Managers independent, authoritative & comprehensive information on Spreadsheet Risk Management. You can see published peer-reviewed conference proceedings on Cornell University’s moderated scientific repository

Some relevant papers:

On the problem of Spreadsheet Errors:

On the Impact of Errors:

Protecting Spreadsheet against Fraud:

On the Scale of the problem:

Testing Spreadsheets:

Also, “G. Moore“:

Yet another example of why firms need to implement and control accounting and reporting systems that actually do accounting and reporting. The case here, most probably, is of yet another firm that cut corners on their system implementation/process and accepted having to finish the (reporting, etc.) job in Excel. There really is no reason to do any formal financial statement publication via Excel. Seriously, a $150 off the shelf accounting package can provide both reasonable reporting AND an audit trail.

And finally, “Chris Wilson” who rather negatively notes:

[…] when I worked at a Big Four accounting firm (tax, not audit), the culture from the manager level up was always on hard copies, always purportedly on the big picture. I sometimes got the feeling they felt they were entitled to be so far removed from the actual work because of their position on the totem pole. At any rate, the only hope for quality control on spreadsheets was in junior level peer review, and I imagine that’s true at a lot of firms.

Nasty. Just another reason to look closely at the numbers (and those that might not be visible).


Written by walonline

July 29, 2008 at 8:10 am

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