Model Audit: The gateway to error-free business analyses

Posted by CesarMuler on December 20th, 2015

A model audit is a task performed on a financial model to eliminate any spreadsheet error. It takes into its purview tax and accounting, sensitivity testing and checking of data within the model. A commercial consultant takes care of model review so that the results are error free and reliable. It entails high accuracy as any kind of omission or negligence in the financial model can lead to trouble later on. The concept has been primarily related to infrastructure finance but now the scope is extended to various other fields as well.

A commercial consultant is the best person to refer to if you are thinking to invest in a project. The expert will help you with a variety of tools and also help you assess the risks involved along with the probable gains and market movements related to the field of investment. A model audit helps to get a review of the logic of the financial model proposed along with its consistency with financial and contractual documentation. The highly skilled and experienced team carefully deconstructs and puts under the scanner the entire financial model to provide you with essential insights on the commerciality of the project and its viability. It has been regarded as a key tool in the industrial, logistics and mining sectors as these projects usually have a long gestation period, which therefore entails high data accuracy taking into consideration a variety of additional functions.

A commercial consultant with his or her wealth of experience and extensive portfolio coordinates a host of services including cash reconciliation, financial analysis, mergers and acquisitions and divestment analysis making a perfect commercial assessment. In oil, gas and drilling sectors, he undertakes complete review of contractual documents, with review and negotiation of PSC terms from an economic viewpoint. The model audit is undertaken keeping in mind the bigger scenario exposing various loopholes and issues in the presented financial model and also thus helping in formulate a back up with the highest cover possible.

In recent years, it is argued that a “shadow modelling” approach is the best way to carry out a model audit, as it ensures finer accuracy in documentation and accounting thereby improving computational correctness, but other traditional audit models are also in practise. A commercial consultant provides valuable input in probabilistic and deterministic modelling, investment appraisal and full economics to make a final investment decision be it in bulk commodities or precious metals.

A model audit aims to check whether the accounting handlings put within the financial model are viable with current local GAAP and with key requirements of the project’s financing documentation. It plays an important role to eliminate any unexplained cash flow trends or variations in key financial pointers based on inputs. The ultimate aim remains the same, i.e., to mark risk assessment and forecast the potential impact by applying those after audit changes. A commercial consultant is highly regarded as a pundit to offer you advise even when you are interested in any kind of property development or carrying out any critical real estate transaction by providing you with valuation based on cap rate, book value, DCF and other significant financial drawings.

To eliminate errors in a spreadsheet-based financial model audit has become an indispensable tool. The required financial services to determine the viability of your investment can be offered by a commercial consultant.


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CesarMuler

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CesarMuler
Joined: February 17th, 2013
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