Fimodo chats to Andy Hucknall, PPP financial model audit at PKF.
What do you do?
I direct numerous model audit projects at PKF (UK) LLP, one of the world’s leading model audit practices, as well as being actively involved in business development. My roles includes writing proposals, planning of work, direction of model audit teams, quality control and liaising with clients.
Why did you start to work in model audit?
It just happened one day – I had just joined the financial modelling team of a corporate finance practice, having built financial models for PPP sponsors for many years, when I was asked to manage a model audit project. Before I knew it, I was managing 13 concurrent model audits, and never looked back. Even after 100+ model audit projects, I still get a buzz from helping clients to get their projects financed.
It seemed the natural progression to use my financial model development skills to review models built by others, a bit of a “poacher turned gamekeeper”.
What was your first job?
My first job was in audit at Touche Ross (now Deloitte) where I undertook my chartered accountancy qualifications. My first assignment was to do a stock-take at a garden centre, and I remember trying to count goldfish in a pond!
Describe a typical day?
My day starts around 5am (if I am lucky) when my young son wakes up. I enjoy reading ‘The Times’ on my train journey into London, and I am in the office around 8.30am. I normally start by reading the latest online infrastructure finance and PPP news, and following up any leads.
There is no such thing as a typical day in model audit, but the day could include reviewing the reports to be sent to clients, writing proposals, phone calls or meetings with clients and potential clients, undertaking client acceptance procedures and eating cakes (our team always finds an excuse for a cake!).
I extend the clear desk policy to have a clear email inbox, ensuring that all the days emails are responded before I leave. As we have clients around the world, I remain in contact via BlackBerry, and we have secure Citrix to access to all our files on our Document Management System from home.
What is on your agenda for 2009-10?
My first priority is always to ensure that our model audits are completed on time and to our demanding quality requirements. We are introducing a new method of reporting of base case findings to clients to make it easier for model authors to use, whilst retaining the quality and relevance of our existing reports for sponsors and funders. We understand the different requirements of the model author and the funders / sponsors are introducing this new reporting tool to better reflect the differing needs of all the users of our reports.
In the UK, with a change in Government likely, we are ready to respond to any changes in the PPP related market. We are also working extensively on projects in Europe, the Middle East, North Africa and North America, and expect to continue to see further growth overseas.
What is your favourite financial modelling trick? Why?
Explode. A tool rather than a trick, but I love the simplicity of this add-in to navigate around financial models.
How are model audits undertaken in your organisation?
Our methodology is a combination of ‘top-down’ analytical review and detailed ‘bottom-up’ analysis. We believe that you need to have reviewed all of a model’s unique formulae in order to give the most comprehensive opinion required for financial close purposes. That said, we also provide modelling best practice reviews and high-level integrity reviews and other specific reviews required.
We undertake IFRS and UK GAAP accounting reviews and UK tax reviews in-house, whilst drawing on the expertise of the PKF International Limited network of legally independent firms for local tax and accounting reviews. All of our team are qualified either as accountants or tax specialists, many of them having worked and qualified in our audit practice and others having extensive sector experience.
Do you have any hidden talents?
Not sure if I have any talents….. that said, I did manage to fix my refrigerator recently!
Links:
Email: andy.hucknall@uk.pkf.com
Work: www.pkf.co.uk/mcs
LinkedIn Profile: www.linkedin.com/in/andyhucknall
Hi Andy,
It is refreshing to read about your passionate approach to not just model audit but also to client service. This is one of the few times I have heard reference to client service in financial modelling forums.
The potential change in the UK government could give rise to siginficant repeat business opportunities for model audit firms, thats an interesting insight I hadn’t though of.
Regards,
Nick
You say you like Explode as an add-in. Which other add-ins would you recommend for financial modellers looking to improve the quality of their financial models. My financial modelling team has a structured peer review process of our models but are always trying to improve the processes.
Martin
There are many different software tools, and I have yet to see one that does everything.
Spreadsheet mapping tools (such as Spreadsheet Professional (SP) or OAK) show how a worksheet is structured, showing whether cells are labels, inputs or formulae, and in particular, showing whether calculation cells are consistent with adjoining cells.
Having consistent cells in a row, or a block of rows, means that only one cell in that row or block is unique, and only that unique formulae needs reviewing. This reduces review time, and in a model audit, reduces cost!
Another area that software can help is in identifying potential errors. SP, for examples, unused inputs, unused formulae, formulae with no precedents, references to blank cells, hard codes within formulae and complex formulae. These potential errors can then be reviewed to see if there is an error, or amended to make the model more robust.
Software should be considered a tool as part of the reviewing process, whether a peer review process or an independent review. We provide a service called a ‘modelling best practice review’, and I am happy to share the key elements of this:
- separation of inputs, calculations and outputs;
- consistency of formulae across rows, down columns and across worksheets;
- integrity of financial statements (no balancing figures!);
- linearity of calculation flow (no circularities).
Using the tools, such as SP, allows the reviewer to focus on areas of the model with more risk, and I think that is the best way of thinking about software.
Hope this is of help.
Regards,
Andy