Spreadsheet Errors Mb
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This document discusses spreadsheet errors and studies that have found a high prevalence of errors in real-world spreadsheets. Specifically: - Studies show that up to 90% of spreadsheets contain some type of error. Even studies of financially significant spreadsheets found errors. - When people review spreadsheets to find errors, they are only moderately successful at detecting errors. Not all errors are caught. - A case study example showed how a simple input error in a financial model caused a 20% difference in results. The error was only caught when the client reviewed the interim model. - Reasons for errors include that spreadsheets are complex but safeguards and testing are limited. Developers may also be overconfident
Spreadsheet Errors Mb
- 1. DFMW – Homework 1Spreadsheet ErrorsApril 5, 2010Motoki Bandaimotoki_bandai@mba.berkeley.edu
- 2. Since 1995, studies show that up to 90% of spreadsheets contain some type of error2Select spreadsheet error studiesAll sizeable, real-world spreadsheets with many cells, rows, and/or formulas
- 3. In the 2nd model of Lukasic’s study, the investment value was overstated by 16%
- 4. Lawrence & Lee’s study used the 30 most financially significant spreadsheets audited by Mercer. All had errors.Spreadsheet errors are abundant. Even the best make mistakes and some are extremely serious
- 5. We are not perfect at catching these errors, even if we had the chance to review the spreadsheets3Select code inspection experimentsIn these experiments, subjects examined spreadsheets that had several errors
- 6. The subjects reviewing the spreadsheets were significantly less than perfect in detecting errorsNot only do we make mistakes in our spreadsheets, we are only moderately good at finding them
- 7. Case Study: the simplest of mistakes can cause a big difference in the end result4CorrectInput errorActual error made in the firm I used to work forFX calculation was correct. Simple input errorCaused drastic difference in results. ~20% more products deemed overpriced compared to US, France, Germany, UKWhat made it worse: we sent the model with the error to the client for interim review and they caught itLooking back at our old spreadsheets, turns out ~90% of our spreadsheets had errors – some minor, some significant. This time was the first time client picked out a mistake
- 8. Why do we make so many mistakes and why don’t we catch them?A study conducted by Hall (1996) concluded:Spreadsheets are important and complexBut used only limited safeguards…And used limited data testingInspection was also limited18% of those surveyed say their project was rushedCaused by corporate policy?A minority of companies surveyed have development rules and guidelines, and only a minority fully follow themCaused by overconfidence?Spreadsheet developers were found to be very confident with their spreadsheets, even while their work contained errorsOverconfidence tends to blind people to the need to take steps to reduce risks5
- 9. What we did6Spreadsheet createdSend to clientManaged to still senderror prone models