Financial Model Audit Checklist

This financial model checklist is a set of questions to ask before you rely on a model, whether you built it or inherited it. Work through the sections in order, mark each item pass, fail or not applicable, and record failures in the findings log at the end. We list everything below, so there is nothing to download. The checklist assumes a standard layout; see financial model structure for what that looks like. It supports the modeling work in budgeting and forecasting. If you want an independent review of an important model, get in touch.

How to run the review

1. Read-through (30 minutes): understand the purpose, structure and outputs before checking details.
2. Systematic pass: go through the checklist sections below.
3. Targeted tests: change inputs and watch the outputs; insert extreme values.
4. Findings log: record each issue with location, severity and fix.
5. Re-test after fixes.

Review someone else's model, or have someone else review yours. Authors tend to read what they meant to write.

1. Purpose and documentation

• [ ] The purpose and the question the model answers are stated.
• [ ] The audience and decision are identified.
• [ ] A sheet map or index exists.
• [ ] Key assumptions and sources are documented.
• [ ] Limitations are stated.
• [ ] Version, date, author and status are on the cover.
• [ ] A change log exists and is current.

2. Structure

• [ ] Inputs, calculations and outputs are separate.
• [ ] Typed numbers appear only on input sheets.
• [ ] The timeline is the same on every sheet.
• [ ] Each sheet has a clear single purpose.
• [ ] Flow is consistent (inputs to calculations to outputs).
• [ ] No hidden sheets, rows or columns with logic (or they are documented).
• [ ] No unexplained external links.
• [ ] Units are labeled on every sheet.

3. Inputs

• [ ] Every input has a source and date.
• [ ] Inputs are color-coded consistently.
• [ ] Historical data reconcile to the accounts.
• [ ] Input ranges are plausible (growth, margins, days, rates).
• [ ] Percentages are entered as percentages (5% not 5).
• [ ] No inputs are duplicated in several places.
• [ ] Data validation limits invalid entries.

4. Formulas

• [ ] One formula per row, consistent across columns.
• [ ] No hard-coded numbers inside formulas.
• [ ] No overwritten formulas (typed values in formula rows).
• [ ] Absolute and relative references are correct.
• [ ] Ranges in totals include all rows and exclude subtotals.
• [ ] Signs are consistent (revenue and costs).
• [ ] Division by zero is handled where needed.
• [ ] Lookups use exact match unless an approximate match is intended.
• [ ] Dates and period logic are correct (including leap years and part periods).
• [ ] No unnecessarily complex formulas (can they be split?).

5. Logic and integrity

• [ ] The balance sheet balances in all periods.
• [ ] Cash on the balance sheet equals cash flow closing cash.
• [ ] Retained earnings, fixed assets and debt roll forward correctly.
• [ ] Depreciation is added back in cash flow.
• [ ] Changes in working capital have the right sign.
• [ ] Interest is calculated from the right balances.
• [ ] Tax logic is sensible (including losses).
• [ ] No circular references, or they are controlled by a switch.
• [ ] Annual totals equal the sum of months.
• [ ] Cash is not used as a plug.

6. Reasonableness

• [ ] Margins, growth and ratios are consistent with history.
• [ ] Large changes between periods are explained.
• [ ] Revenue per head, cost ratios and working capital days are plausible.
• [ ] Results reconcile with the budget or prior forecast, with differences explained.
• [ ] Capacity can support the volume forecast.
• [ ] Funding is sufficient in every period.

7. Scenarios and sensitivities

• [ ] The scenario selector works and is validated.
• [ ] Outputs show the active scenario name.
• [ ] Extreme inputs produce sensible outputs (zero growth, large decline).
• [ ] Key sensitivities have been run and documented.
• [ ] Downside covenant tests are included.

8. Outputs and presentation

• [ ] Outputs link to calculations; nothing is typed.
• [ ] Charts and tables update with inputs.
• [ ] Labels, units and periods are clear.
• [ ] Notes explain the key messages and assumptions.
• [ ] Numbers on outputs match the underlying sheets.

9. Governance

• [ ] An independent person has reviewed the model.
• [ ] The model has an owner responsible for updates.
• [ ] Access and editing rights are controlled.
• [ ] The version used for decisions is archived.
• [ ] A process exists for updating with actuals.

Severity rating

Findings log (template)

(Examples of the format only.)

Quick tests that find errors fast

1. Zero test: set revenue growth to zero. Do all lines behave sensibly?
2. Double test: double an input. Do dependent lines double where they should?
3. Break test: put a very high cost in one month. Does cash fall by the right amount?
4. Flip test: switch scenarios and confirm checks still pass.
5. Trace test: pick a number on the summary and trace it back to its inputs.

For good habits that prevent these issues, read financial modeling best practices. For a typical set of spreadsheet errors, see common spreadsheet model errors. For startup models, see startup financial projections. Margin logic should also be sense-checked against unit economics.

FAQs

What should a financial model review cover?

Purpose and documentation, structure, inputs, formulas, logic, reasonableness, scenarios, outputs and governance.

How long does a model review take?

A small model can be reviewed in a few hours; a large one takes days.

Who should review a model?

Someone who did not build it and understands the business.

What is the most common error?

Hard-coded numbers and inconsistent formulas.