Traditional model audit vs ‘ExcelCheck’

Traditional financial model audits are often a necessary evil, both for those conducting them and the finance departments having their spreadsheets scrutinised.

The rubber stamp of ‘approval’ that auditors provide when conducting a financial model audit comes with a hefty price tag—and rightly so, because the 'transmittal letter' they provide comes with significant liability.

However, while these audit documents do provide financial controllers with a feeling of security, usually a model’s ‘correctness’ is dependent on the data set it’s been audited with. In practice, financial model audits effectively say….“yes, X model, exactly as it stands now, works appropriately to achieve Y output with Z dataset.” BUT the moment you start tweaking parts of X, alter the Y you want to generate, or Z dataset gets updated, your audit effectively becomes outdated. Any approval previously given will no longer stand.

‘ExcelCheck’ offers a pragmatic alternative, but the offering is specific. Here are the differences between a traditional model audit and an ‘ExcelCheck’:

1. Pragmatic application

Traditional model audit: Model auditors typically check model integrity with a two-step process:

  1. Run spreadsheet software tools to check for model consistency and create a map
  2. Use the map to check the spreadsheet manually, ‘cell-by-cell’ to confirm logic


Today’s model auditing software tools only check for consistency and poor referencing, they do not actually analyse any logic, and ‘cell-by-cell’ reviews are as prone to human error as the building and maintenance of spreadsheets themselves. In fact, research suggests that these manual reviews capture around 70% of errors, leaving the other 30% undetected (Source: Financial Model Audit—A Fresh Approach).

ExcelCheck: The principle difference between a traditional financial model audit and ExcelCheck is the pragmatic, useful outcome and long-term benefits. ExcelCheck doesn’t just verify the models you have but takes your important financial model spreadsheets and rebuilds them to pinpoint errors and potential errors. This ensures the lowest chance of errors both in the short and long term.

For some businesses, this can be done by stripping out unnecessary logic while for others it’s a complete overhaul of content, coding, format, structure, and organisation—and anything in between. For example, many Excel models become cluttered with over-complicated, unnecessary formulae. Often nested IF statements, OFFSET, VLOOKUP and INDEX can be replaced with simpler alternatives which reduce the likelihood of errors occurring in the future. Similarly, businesses often replicate formulae to calculate the same or similar output. Large chunks of logic are harder to maintain and are more likely to return inaccuracies because they are reliant on so many elements. These aren’t optimisation opportunities that will be identified and rectified when a model audit is conducted but are long term, pragmatic benefits of ExcelCheck.

2. Liability

Traditional model audit: Traditional model audits come with indemnity insurance in the form of 'transmittal letters’ effectively providing a guarantee that your spreadsheet has no errors. Therefore, in theory, if your model subsequently returns faulty outputs that commercial decisions are based upon, costing your company money, you can claim against your model audit provider. In practice, this insurance is usually only valid for the exact data set that the transmittal letter was provided for.

ExcelCheck: Excel Check provides reassurance, rather than insurance. Its key purpose is to check the logical and arithmetical integrity of your spreadsheet model within the context of the commercial objectives you have set.  By rebuilding your model with these clear objectives we have the best chance of dealing with multiple data sets in the long-term (as opposed to the short term security that model audits provide). Therefore, Excel Check provides the same level of expert, thorough analysis without the legal guarantee. Since ExcelCheck works with the understanding that data sets can change, so you can be sure that your outputs will remain accurate whatever reasonable changes in the data being input.

3. Cost

Traditional model audit: The 'transmittal letter,’ which verifies the model’s integrity, provides companies like yours with insurance—something that can be claimed on if subsequent errors arise. However, experts in modelling have identified this as a worrying trend, saying “often the criteria for selecting an auditor then becomes a straight comparison of who will offer the highest ‘cover’ for the lowest price” (Source: Financial Model Audit—A Fresh Approach). As a result, this means that expertise and usability of audit reports come second and third to value for money quotes.

ExcelCheck: ExcelCheck is charged on an ‘hourly’ basis which depends on the size of your spreadsheet and the amount of repetition/duplication.

It can take anywhere from a few hours up to three weeks for particularly complex spreadsheets; the length of time depends on some technical factors like duplication, the number of original formulae, and the complexity of the original formulae.

For an accurate quote, simply upload your spreadsheet model and we will give you a quick call to discuss it with you. Then we will go about getting you a quote and delivery estimate:

ExcelCheck

If you’re concerned about inaccuracies in your Excel spreadsheet or other problems associated with your Excel model(s), our ExcelCheck service offers a hassle-free way of identifying any errors and improvements.

When we receive your model, it undergoes a thorough MOT and repair service where we advise on best practice usage going forward. So, what you receive back is an accurate, uncluttered, fully functional, and—most importantly—reliable version of the model you left us with.

To book your Excel model check today, call 020 7450 3318 or email dominic.robertson@lazulisolutions.com.

Please note, we sign NDAs and all models will be treated confidentiality.

Sign up for our newsletter here: