audit-xls

What this skill does

# Audit Spreadsheet

Audit formulas and data for accuracy and mistakes. Scope determines depth — from quick formula checks on a selection up to full financial-model integrity audits.

## Step 1: Determine scope

If the user already gave a scope, use it. Otherwise **ask them**:

> What scope do you want me to audit?
> - **selection** — just the currently selected range
> - **sheet** — the current active sheet only
> - **model** — the whole workbook, including financial-model integrity checks (BS balance, cash tie-out, roll-forwards, logic sanity)

The **model** scope is the deepest — use it for DCF, LBO, 3-statement, merger, comps, or any integrated financial model before sending to a client or IC.

---

## Step 2: Formula-level checks (ALL scopes)

Run these regardless of scope:

| Check | What to look for |
|---|---|
| Formula errors | `#REF!`, `#VALUE!`, `#N/A`, `#DIV/0!`, `#NAME?` |
| Hardcodes inside formulas | `=A1*1.05` — the `1.05` should be a cell reference |
| Inconsistent formulas | A formula that breaks the pattern of its neighbors in a row/column |
| Off-by-one ranges | `SUM`/`AVERAGE` that misses the first or last row |
| Pasted-over formulas | Cell that looks like a formula but is actually a hardcoded value |
| Circular references | Intentional or accidental |
| Broken cross-sheet links | References to cells that moved or were deleted |
| Unit/scale mismatches | Thousands mixed with millions, % stored as whole numbers |
| Hidden rows/tabs | Could contain overrides or stale calculations |

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## Step 3: Model-integrity checks (MODEL scope only)

If scope is **model**, identify the model type (DCF / LBO / 3-statement / merger / comps / custom) and run the appropriate integrity checks below.

### 3a. Structural review

| Check | What to look for |
|---|---|
| Input/formula separation | Are inputs clearly separated from calculations? |
| Color convention | Blue=input, black=formula, green=link — or whatever the model uses, applied consistently? |
| Tab flow | Logical order (Assumptions → IS → BS → CF → Valuation)? |
| Date headers | Consistent across all tabs? |
| Units | Consistent (thousands vs millions vs actuals)? |

### 3b. Balance Sheet

| Check | Test |
|---|---|
| BS balances | Total Assets = Total Liabilities + Equity (every period) |
| RE rollforward | Prior RE + Net Income − Dividends = Current RE |
| Goodwill/intangibles | Flow from acquisition assumptions (if M&A) |

If BS doesn't balance, **quantify the gap per period and trace where it breaks** — nothing else matters until this is fixed.

### 3c. Cash Flow Statement

| Check | Test |
|---|---|
| Cash tie-out | CF Ending Cash = BS Cash (every period) |
| CF sums | CFO + CFI + CFF = Δ Cash |
| D&A match | D&A on CF = D&A on IS |
| CapEx match | CapEx on CF matches PP&E rollforward on BS |
| WC changes | Signs match BS movements (ΔAR, ΔAP, ΔInventory) |

### 3d. Income Statement

| Check | Test |
|---|---|
| Revenue build | Ties to segment/product detail |
| Tax | Tax expense = Pre-tax income × tax rate (allow for deferred tax adj) |
| Share count | Ties to dilution schedule (options, converts, buybacks) |

### 3e. Circular references

- Interest → debt balance → cash → interest is a common intentional circ in LBO/3-stmt models
- If intentional: verify iteration toggle exists and works
- If unintentional: trace the loop and flag how to break it

### 3f. Logic & reasonableness

| Check | Flag if |
|---|---|
| Growth rates | >100% revenue growth without explanation |
| Margins | Outside industry norms |
| Terminal value dominance | TV > ~75% of DCF EV (yellow flag) |
| Hockey-stick | Projections ramp unrealistically in out-years |
| Compounding | EBITDA compounds to absurd $ by Year 10 |
| Edge cases | Model breaks at 0% or negative growth, negative EBITDA, leverage goes negative |

### 3g. Model-type-specific bugs

**DCF:**
- Discount rate applied to wrong period (mid-year vs end-of-year)
- Terminal value not discounted back
- WACC uses book values instead of market values
- FCF includes interest expense (should be unlevered)
- Tax shield double-counted

**LBO:**
- Debt paydown doesn't match cash sweep mechanics
- PIK interest not accruing to principal
- Management rollover not reflected in returns
- Exit multiple applied to wrong EBITDA (LTM vs NTM)
- Fees/expenses not deducted from Day 1 equity

**Merger:**
- Accretion/dilution uses wrong share count (pre- vs post-deal)
- Synergies not phased in
- Purchase price allocation doesn't balance
- Foregone interest on cash not included
- Transaction fees not in sources & uses

**3-statement:**
- Working capital changes have wrong sign
- Depreciation doesn't match PP&E schedule
- Debt maturity schedule doesn't match principal payments
- Dividends exceed net income without explanation

---

## Step 4: Report

Output a findings table:

| # | Sheet | Cell/Range | Severity | Category | Issue | Suggested Fix |
|---|---|---|---|---|---|---|

**Severity:**
- **Critical** — wrong output (BS doesn't balance, formula broken, cash doesn't tie)
- **Warning** — risky (hardcodes, inconsistent formulas, edge-case failures)
- **Info** — style/best-practice (color coding, layout, naming)

For **model** scope, prepend a summary line:

> Model type: [DCF/LBO/3-stmt/...] — Overall: [Clean / Minor Issues / Major Issues] — [N] critical, [N] warnings, [N] info

**Don't change anything without asking** — report first, fix on request.

---

## Notes

- **BS balance first** — if it doesn't balance, everything downstream is suspect
- **Hardcoded overrides are the #1 source of silent bugs** — search aggressively
- **Sign convention errors** (positive vs negative for cash outflows) are extremely common
- If the model uses VBA macros, note any macro-driven calculations that can't be audited from formulas alone