Financial model audit checklist

To review a financial model, check five things in order: the layout (inputs separate from formulas), the formulas (same formula across each row, no typed numbers inside), the links (no broken or outside files), the statements (balance sheet balances, cash ties), and the logic (growth, margins and discount rates make sense). The 25 checks below take about two hours on a mid-size model.

Checked 3 November 2026 · sources below

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Why a checklist helps

Spreadsheet errors are common, not rare. Raymond Panko's research summary 'What We Know About Spreadsheet Errors' (Journal of End User Computing, 1998, revised 2008) found errors in most of the operational spreadsheets that were audited, with roughly 1-5% of formula cells wrong. One wrong cell can flow into every total. A fixed, numbered list stops you from checking only the parts you already trust.

Checks 1-5: Layout and inputs

1. Inputs are on their own sheet or clearly coloured, and appear only once.
2. Every sheet has a title, units (thousands? millions?) and the currency.
3. Time runs the same way on every sheet (same first column, same period length).
4. No hidden rows, columns or sheets that feed totals. Unhide everything once.
5. A short notes or cover sheet explains what the model is for and who changed it last.

Checks 6-11: Formulas

6. Each row uses one formula copied across. A cell that differs from its neighbours is the first thing to look at.
7. No typed numbers inside formulas (for example =B4*1.07); the 7% should be an input cell.
8. Sums cover the full range - check the first and last row of every total.
9. No #REF!, #DIV/0!, #N/A or #VALUE! anywhere, including hidden areas.
10. Circular references - formulas that depend on their own result, often interest on average debt - are either removed or deliberate, documented and switched by one input.
11. Signs are consistent: costs either always negative or always positive.

Checks 12-15: Links and dates

12. Data > Edit Links shows no outside workbooks, or each one is expected.
13. Named ranges point to the right place (Formulas > Name Manager) and none show #REF!.
14. Lookups (XLOOKUP, VLOOKUP, INDEX/MATCH) use exact match unless there is a reason not to.
15. Dates come from one start-date input, so every period, year-end and date switch moves together.

Checks 16-20: The three statements

16. The balance sheet balances in every period (a check row that shows zero).
17. Closing cash on the balance sheet equals closing cash on the cash flow.
18. Retained earnings move by profit minus dividends.
19. Debt never goes below zero and interest uses the right balance (opening or average, but stated).
20. Depreciation stops when the asset is fully written off.

Checks 21-25: Logic and valuation

21. Revenue growth, margins and working-capital days (how long customers take to pay, how long stock sits) are believable next to the company's past and actual results.
22. In a DCF (discounted cash flow valuation), the long-run growth rate is below the discount rate, and cash flows are after tax and after reinvestment.
23. The discount rate matches the cash flow: cash flow to the whole firm uses WACC (the blended cost of debt and equity); cash flow to shareholders uses the cost of equity.
24. A sensitivity table shows which inputs move the answer most.
25. Change one input a lot (for example sales -30%): the model still balances and the result moves the way you expect.

When a check fails

Keep a simple issue log: sheet, cell, check number, what is wrong, how serious (changes the answer / cosmetic), the fix, and who signed it off. Fix the serious ones first, then re-run checks 16-17 and 25, because a fix in one place often breaks a total elsewhere. Save a dated copy of the model before and after. The same checks work in Google Sheets; only the menu names differ.

Questions

How long does a model review take?

Roughly two hours for a mid-size model of 5-15 sheets with this list, in our experience; large project-finance models can take days.

Is this the same as a formal model audit?

No. A formal audit is a paid, signed opinion by a specialist firm. This checklist is a self-review that finds the common errors first.

Can software do these checks?

Partly. Tools can flag inconsistent formulas, typed numbers and broken links. Judging the logic - is 12% growth sensible? - still needs a person.

Sources

• Raymond Panko, 'What we know about spreadsheet errors' (research summary)
• Microsoft Support: Detect errors in formulas
• ICAEW: Financial Modelling Code (Improve your financial modelling practice)