Controls/tests that prove a software application works 2391

  • For those who are familiar with Equity Edge, a software application that tracks equity awards and calculates compensation expense, has anyone heard of or come across calculation errors within the software?
    Assuming the data inputs are accurate (e.g. volatility, interest free rate, etc.), we rely that the software will calculate comp expense accurately. Currently, our acctg group does not re-calculate comp expense manually to make sure the Black-Scholes (B-S) calc in the software is correct.
    However, our external auditor has mentioned this more than once…that perhaps we should be doing some sampled calculations to make sure Equity Edge is correct. The external auditor mentioned a few years back the software application contained an error which was subsequently fixed via patches.
    Management does not believe this to be reasonable. If we cannot rely on this application, what’s next…re-calculating excel spreadsheets to ensure Excel works?
    Does anyone perform manual B-S cals?
    Thanks for your input/comments.

  • Hi - I did a quick search on Equity Edge and there are numerous vendors using that product name. While I’m not familiar with this product, below are a couple of ideas:

    1. Always keep up-to-date with respect to software patches. Recently, even Excel 2007 had an unusual calculation issue under rare circumstances that Microsoft had to quickly patch. If vendors have had issues, then most likely they are patched. Otherwise the vendor will not last very long in the marketplace if their software can’t be trusted as being reliable.
    2. I’d contact the vendor’s technical support area and check directly with them on any past or present issues with EE. I’ve always found that ‘here-say’ is less reliable than researching the facts. In other words, the auditor may have indeed encountered issues in the past, that may or may not be currently fixed.
      Good luck 🙂
      Below are a couple of links you can paste to your browser that might provide more info.
      http-and-#58;// calculations
      http-and-#58;// Edge software
      http-and-#58;// Edge errors

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