Formally Auditing Spreadsheets

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Before it advances money to an organization that comes to it seeking a loan to pursue a particular venture, a bank will often insist that the financial projections that have been presented to it do in fact add up.

The largest part of the work of Operis, the company that developed OAK, is performing financial model reviews of this kind. Many of the larger accounting firms have departments that specialize in auditing spreadsheets too.

The final outcome of getting a spreadsheet checked by any of these organizations is a formal letter expressing an opinion that the spreadsheet does what it is supposed to. But the processes by which they arrive at this opinion vary considerably among the firms.

•Most firms perform a code inspection: they examine the spreadsheet formulas, one at a time.
•At least one firm develops a completely new model from first principles, and reconciles its results to the results provided by its client.
•Operis's own method is close to that, but much less expensive: it develops parallel reconstructions of the major elements of the model, such as the revenues, costs and interest calculations.
•Yet another firm simply keys the assumptions into its own template model, and sees if it gets similar answers.

OAK provides capabilities that have a role in all of these approaches.