The professional approach to financial model auditing

Welcome to the first in a series of articles exploring the importance of a professional approach to model auditing in providing assurance for energy and infrastructure transactions.

Financial models are at the heart of energy and infrastructure transactions. They are essential tools for assessing investments, securing financing, and planning for the long-term success of projects. To manage risk effectively, project stakeholders must trust these models and obtaining a model audit opinion is often a key condition for securing financing.

At Forvis Mazars, financial model audit is considered an assurance service. This approach is distinct from advisory services, and failure to understand this difference can severely undermine the quality of the work delivered. This series explores the key elements that define a professional approach to model auditing:

• Ethics: Professionals work to an ethical code. We outline the code we work to and the importance of a mindset of “professional scepticism” for those undertaking assurance work.
• Quality management: A robust methodology is essential for model auditors, but it is only effective when integrated into a comprehensive quality management framework. We will explain how this ensures consistent, reliable results across all engagements.
• Security: Protecting sensitive financial information is more important than ever. We will demonstrate how internal security protocols and commitment to data governance are vital if your data is to stay secure throughout the model audit process.
• Trust: We will discuss how financial stability, a commitment to ESG principles and long-term client relationships help model auditors act as a trusted partner for regulated banks and investors.
• Compliance: Banks and funds are obliged by their regulators to undertake due diligence of their service providers. We will conclude our series with a recommended checklist to consider when evaluating the suitability of a potential model auditor.

Whether you are new to model audit, an intermediary who recommends model auditors, or a seasoned stakeholder relying on model audit opinions, this series will provide a deeper understanding of what makes a professional model auditor.

The first article is now live! Find out how ethical standards and a mindset of “professional scepticism” are fundamental to providing informed, reliable model audit opinions.