|Why should I get my model audited?
||Some models are required to be audited as a Condition Precedent (CP) in a transaction- but for those that have no such requirement – a good reason why you should get it audited is: humans make errors. This is a good enough reason for an audit, but we also add:
- A financial model is only as strong as its weakest link. Hence the importance of a thorough model review.
- An audit brings fresh eyes / and an independent 3rd party who may notice issues that the everyday user does not.
- The financial model is the backbone of a transaction, and the model signed-off at financial close often becomes the legal decision-making tool post financial close that (in Project Finance) calculates (amongst other things) covenants, required additional repayments, build-up of reserves (i.e. DSRA) and distributions to equity (or restrictions thereof), and in all transactions generally (from an IPO of a gold mine to a cashflow forecast re a widget factory) - is one of the key files that will be referred to many years after the transaction.
- Stating the obvious, an Excel document is unlike a Word or PDF document in that there are a huge amount of calculations “under the surface” that you don’t see. There could be a myriad of errors - invisible until it is audited.
|What audit service do you provide?
||Whatever the client requires : We offer varying levels of reviews, ranging from a quick “healthcheck” to a complete model review / rebuild / interrogation of all inputs and calculations :
- Healthcheck : Need a quick high-level review? A day is enough for us to review the model, including running “model maps”, and employ other tools in audit software, to give you a high level summary of issues.
- Pre Audit check: If your transaction CP’s requires that the model is audited by a “Big 4” firm, you can save money by sending it to us first for an initial review, as we will not charge you substantial hourly rates to advise minor issues.
- Checking calculations only (i.e. no checking against due diligence / documentation).
- Checking that calculations agree with documentation.
- Checking that inputs agree with documentation.
- Adding error checks: We’ll fix the issues we find and add more error checks to help you in the future.
- Full interrogation of inputs and calculations: more than just checking that the model agrees with the documentation, some clients requires us to “dig deeper”, understand the sector / service, and further question information providers.
- Creating a new “shadow” model, that should deliver the same results in the base case and under sensitivities.
|How can I do an initial self-audit before sending it to an Audit firm?
||Save money by completing your own audit first :