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An end to audit iterations

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October 2020  |  Model Audit

Why we at Gridlines decided to throw out the concept of financial model audit iterations.

 

Iteration based charging is the norm in the financial model audit sector. This means that the price of an audit will be quoted assuming a fixed number of iterations, usually 3-4, and then there will be a supplementary charge – circa 5k for each further iteration of the review.

We understand why our competitors do it. Why wouldn’t they?

  • It means that the risk of the audit dragging on is borne entirely by the client (even though it is often out of their control).
  • It means that additional late iterations can be very profitable as they are generally light touches from the auditor’s perspective but carry a fixed fee.
  • It means that as long as they keep finding issues (big or small) and their client keeps struggling to resolve them, they keep getting paid!

 

We would be mad to ditch this, wouldn’t we?

Maybe, but incentives drive behaviour and we think these incentives are all wrong.

  • We believe that we should be incentivised to get the model audit done as quickly and efficiently as possible.
  • We focus on the material and get out of the way quickly so that our clients can focus on winning/closing their deals.
  • We don’t waste everyone’s time coming up with the same old immaterial points, just to pad out our reports and drive extra iterations.
  • We get involved early so we can spot the big issues and help to resolve them as soon as possible.
  • We are not bound by a rigid ‘transactional’ framework. We want to be free to communicate and collaborate flexibly.
  • We don’t believe that the tail should be wagging the dog. Driving clients to structure their bid process on a multi-million $ deal to avoid paying 5k for another iteration is nuts.

 

Ditching iterations is just one of the ways that we are shaking up the financial model audit market. If you want to find out more, check out our model audit page and fill out the form at the bottom of the page to get in touch.

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Danny Leitch

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