Here’s a peek behind the curtain at how Gridlines goes about pricing for a financial model audit.
Before providing a quote, we will typically request a call with the potential client to help us understand the following key factors that drive our pricing. To do this we have a baseline audit fee which we will adjust upwards or downwards based upon a client’s answers to the following questions.
What is the size and complexity of the model?
A key consideration in pricing an audit is the size and complexity of the model under review, as this gives us a good indication on the time required for the review. For us to price accurately, the ideal is for us to take a look at the model first.
Understandably, clients are often reluctant to share the model ahead of appointing an auditor. When this is the case, we can either sign a Non-Disclosure Agreement to see the model or we ask the client to run our complexity calculator, which will provide us with a structure map of the model as well as scores for the number and complexity of formulae within the model.
Where neither option is possible, we will provide an estimate based upon a description of the model.
What type of model are you working on?
Where the model follows a well-established structure (such as project finance bid models or operational models) we use our template models to follow a parallel build approach to the audit.
This offers efficiencies when compared to the review of a highly-tailored bespoke model which would need a more labour-intensive targeted cell by cell approach, which we can also offer for such bespoke models.
Do you have a requirement for a document review?
In addition to the usual review of the arithmetic logic and integrity of the model, clients often ask for a review of associated documentation to confirm consistency with the model. For a project finance deal, this would typically include a review of the project agreement (in particular payment mechanism) and any loan documentation.
A focussed review of specific extracts and clauses as prescribed by our clients will be quicker than a broad review that the model is consistent with project documentation (as it means we do not have to read and review the entirety of the suite of documents).
Will you need a Tax and Accounting review?
We are also often asked to review the tax and accounting treatment within the model.
The Tax and Accounting review can take two main forms. We can either provide an independent opinion that the treatments are in line with appropriate legislation and practice, or we can review the model for consistency with an independently prepared report. We are happy to do either – we find that the former typically takes us more time, and so could be more expensive.
What level of liability do you require?
Last but certainly not least is the level of liability cover required.
This ranges from a nominal amount (say 2x fees for our Comfort Reviews) to a very large amount (around 5m GBP for our Model Audits) which would typically be required for formal funder due diligence.
To us, this is the difference between giving an informal opinion on something and giving an opinion as if your life depended on it.
For a formal Model Audit with large liability, we perform a full check of all relevant parts of the model, and undergo a full QA process to double check the work done is of high quality. That liability cover is backed up by professional indemnity insurance policies, the cost of which we need to recover through the fee for the formal audit.
For an informal Comfort Review we focus on the typical problem areas, both from our experience and those suggested by you, which tend to highlight any significant material issues, though we do not necessarily review every part of the model in full detail. This Comfort Review is lighter and quicker than a Model Audit, while still giving good comfort to investors that there are no major issues or red flags in the model, and we offer circa 2x fees liability to back this up.
We provide competitive pricing to our clients and deliver a service tailored to the situation they are in and the model assurance they require.
If you are looking for a model auditor who sweats the small stuff as if it were our own project on the line, then you should get in touch with our team today.
