How to Review a Financial Model?

review a financial model
|| | 26. 08. 2021.

If you build or work with financial models, your work will undoubtedly be reviewed sooner or later. In this blog, we will outline the various types of review you might experience, so that you know what to expect, and how to pre-empt some of the issues that may arise.

The more complicated the model, the more likely it needs a review. Some projects or transaction stakeholders, particularly banks, will require, in writing, a comprehensive review of any financial models.

So what does that mean for you, the modeller?

There are generally three categories of model review.

The Full Model Audit

This is the most time consuming and comprehensive of the three. It involves the auditors (who will usually be modellers themselves, rather than auditors in the traditional, accounting sense), who review every unique formula in the model, using any one of a variety of spreadsheet audit software tools out there.

They analyse dependencies between sheets, the overall flow of data and identify inconsistencies, both in model structure and calculation assumptions.

They may or may not be required to validate inputs, although these are usually checked against documentation, rather than actually assessed from a commercial perspective.

The reviewer will usually send a list of comments and cell references back, for the builder to accept or reject, before reviewing the updated model. This is an iterative process and may have as few as one, or as many as double digit ‘passes’ of the model, until all parties are satisfied.

The Limited Review

The review can be limited to any part of the model, or any specific review procedures. They will always be a subset of those performed in the full audit. This activity is usually focused on specific additions to the model, where the rest is largely unchanged since a prior audit. The stakeholders will determine which areas hold the highest risk, and these will be targeted.

Best Practice To Review a Financial Model

The best practice review is just that, a check to ensure that the model is built to best practices. Spreadsheet structure will be reviewed to ensure that formulae are consistent across rows. Integrity checks and the error check network will be validated, and other areas, such as the separation of inputs and calculations will be commented on. This review does not check for actual errors, it comments on the risk of error, based on the style of build the model has undergone.

Many modellers shy away from review, even though it is a great learning opportunity. An understanding of the review principles is an incredibly powerful tool to have in the modeller’s armoury. Understanding how other people tackle a problem will help you develop your own style. The techniques are also useful when checking your own work. And, arguably most importantly, the discipline gives you a heightened awareness of risk in your models, which should always be at the forefront of your mind when building a financial model.

If you’d like to learn more about the different types of model review techniques, take a look at our Financial Model Review course and contact us at

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