Nobody likes surprises when it comes to costs, so one of the most common questions we’re asked is about our approach to model audit pricing.
At Gridlines, we are all about transparency. This starts with how we build our models, which we strive to make as transparent as possible for our clients. Transparency also extends into how we price our financial model audit services.
This is why, for example, we don’t price model audits according to the number of iterations of the model we will see. The price we quote you is the price you will pay.
When pricing a model audit, we will ask you seven key questions:
Let’s look at each of those questions in turn.
What is the structure of your financial model?
Where your model follows a well-established structure (such as project finance bid models or operational models), we follow a parallel build approach to the audit.
If your model follows a less common structure or is more complex, we may undertake a more intensive cell-by-cell approach.
How big and how complex is your financial model?
Knowing the size and complexity of your model gives us a good indication of the time required for the review. If we can see and test your model before quoting, we can deliver a more accurate cost estimate.
Clients are often unable to share the model before appointing an auditor. When this is the case, we provide a “complexity calculator” tool, which gives us a structure map of the model and scores for the number and complexity of formulas within it. This helps us price more accurately without having to see the model.
Where neither option is possible, we will provide an estimate based on a description of the model.
What level of document review is required?
In addition to the usual review of the model’s formulas, clients often ask for a review of key contracts to confirm that the model reflects those documents. For a Project Finance deal, this usually includes a review of the project agreement (in particular, the payment mechanism) and any credit documentation.
Our team is highly experienced in reviewing documentation and assessing how the model reflects key agreements.
When we can review specific extracts and clauses under the guidance of our clients, our review will be quicker and cost less than a broad review of the entire suite of documents.
Do you need an independent tax and accounting review?
Our clients often require a review of the tax and accounting treatment within the model.
Our tax and accounting review can take two primary forms. We can provide an independent opinion on whether the tax and accounting treatments align with appropriate legislation and practice.
Alternatively, we can review the model for consistency with our client’s tax and accounting report if they already have that available.
How many sensitivities or scenarios do you need us to review?
In addition to reviewing the base case financial model, lenders will often require that we review specific sensitivities and scenarios they need for their credit approval. We’ll want to know how many of these there will be so we can assess the time required. Typically, one base case and ten sensitivities are sufficient, but we will always be flexible to meet your needs.
What level of liability do you require?
Last but certainly not least is the level of liability cover you require.
For a formal Model Audit with significant liability, we complete a check of all relevant parts of the model and undergo a rigorous QA process to double-check that the work is high-quality. Our liability level for a Model Audit will typically be around £5m and is backed by professional indemnity insurance.
For an informal Comfort Review, we focus on the typical problem areas that highlight significant material issues. We will also check any parts of the model over which our clients would like more scrutiny. This Comfort Review is “lighter touch” and about twice as quick as and half the price of a complete Model Audit, while still giving investors comfort that there are no significant issues or red flags in the model. When we perform a Comfort Review, our liability will be lower than that of a Formal Audit, typically twice our fee for the review.
What is your timetable for the financial model audit engagement?
We understand that project or transaction timelines may not be within your control. However, it pays to plan ahead and appoint your model auditor as early as possible. We will always make every effort to accommodate the project timeline. The more notice we have, the better we can plan our team resources, resulting in a more cost-effective audit for you.
At Gridlines, our transparent, competitive pricing is designed to provide you with not just services but solutions tailored to meet your unique needs and give you complete peace of mind.
If you are looking for a model auditor who delivers as if it were our own project on the line, contact our team today.
