Usefulness of Spreadsheet Modeling in Financial Accounting and Reporting

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21st century is the century of technology, and spreadsheet is one of the great technological inventions that greatly improve working efficiency. Spreadsheet is a computer application with functions that can improve the user's productivity in collecting, analyzing, and sharing tabular data sets. It displays multiple cells usually in a two-dimensional matrix or grid making up of rows and columns. Each cell contains alphanumeric text, numeric values, or formulas (Wikipedia, 2011). Bagranoff (2010) thought spreadsheet allows users to make complex calculations automatically and to change single number and update all related numbers at the click of a mouse. As one of the most popular financial software, spreadsheet is widely applied in areas such as accounting, finance, marketing, taxation, engineering, educational, scientific and medical fields (Ballantine, 1991). In 2004, SimCorp USA Inc and the Financial Executives Consulting Group found that about 64 percent of domestic companies depend on spreadsheet. Many authors view spreadsheet as a very useful tool for saving much of time and cost as an alternative to the manual worksheet. For example, Ballantine (1991) considered spreadsheet has had quite a dramatic effect on the nature of the work of many people, those who have been exposed to the spreadsheet concept have adjusted to the idea in a fairly easy manner since they were already familiar with the concept via the manual worksheet. At the same time, some authors see spreadsheet as a defective software because of its weakness in information security control, model building and process management. This essay will criticize the usefulness of spreadsheet modeling in financial accounting and reporting in four areas: ease of use, usefulness of information produced, security and control, and compliance with financial reporting.

Easier and more convenient are the major factors that spreadsheet being an alternative to the manual worksheet. One important problem users encountered with manual worksheets was the large number of recalculation when basic assumptions to the budget were made, or when input values were changed. It ultimately proved to be not only very time-consuming but tedious and hence like to cause errors. The spreadsheet enables users to be creative and imaginative, modeler will just enter the input parameters which relevant to the model and recalculate. At a glance the modeler can see the final outcome of the scenario which has just been created, and different scenarios can be set up using the same model just by changing the input parameters to the model (Ballantine, 1991). Even so, Ballantine (1991) also admitted that some useful facilities within spreadsheet software are expensive, such as graphical and database facilities, continuous expanse is needed to keep the ease and convenience. Another benefit of using the spreadsheet as an alternative to the manual worksheet is the saving of time and cost when printing financial report. Before the development of electronic spreadsheets, the production of daily reports would not possible. The use of manual worksheets required that the worksheet was typed manually and perhaps retyped if mistakes were discovered. Using the electronic spreadsheet for printing greatly reduces the time required to obtain printed output. The user simply specifies the area of the worksheet to be printed, and sets the required print options through the spreadsheet. And Howcroft (2006) found two attempts to move away from using spreadsheets to produce budget by using TMC in the past failing because the accountants think TMC is “too inflexible” than spreadsheets. However, it is necessary to realize the weakness of spreadsheets when they are used for models which are large and complex. Large spreadsheets can become difficult to control and may even slow to operate when the hardware capability does not match the processing requirements. Large models can also be difficult to build and the user can get...
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