A novel and useful method of creating signatures for use in classifying failures of software programs in general and circuit design simulation tests in particular. Upon failure of a processor simulation test, the method of the present invention creates a signature comprising the sequence of source code commands executed shortly before the failure. The created signature, along with the reported error message together provides a functional grouping of the tests into groups of similar failures. After executing a suite of processor simulation test programs the resulting signatures are classified by their respective error messages and signatures. The results are then analyzed to pinpoint any program errors, or (in the case of processor design tests) design flaws causing the simulation test failures.