Study guide
9.3 Integrity Checks and Documentation
Financial Modeling & Valuation Analyst FMVA
Track your progress as you read
Finished sections get a check mark.
1 Introduction
Current Exam Facts Program Path and How to Use This Guide
2 Chapter 1: Accounting Foundations
1.1 Accounting Principles 1.2 Reading Financial Statements 1.3 Accounting Decisions in Models
3 Chapter 2: Time Value and Capital Budgeting
2.1 Time Value of Money 2.2 NPV, IRR, and Decision Rules 2.3 Capital Budgeting Cash Flows
4 Chapter 3: Cost of Capital
3.1 Capital Structure 3.2 CAPM, Beta, and Cost of Equity 3.3 WACC
5 Chapter 4: Profitability and Returns
4.1 Profitability and Margins 4.2 Returns and DuPont Analysis 4.3 Per-Share Metrics and Growth
6 Chapter 5: Liquidity, Leverage, and Cash Flow
5.1 Liquidity and Working Capital Metrics 5.2 Leverage, Coverage, and Credit 5.3 Cash Flow Statement Analysis
7 Chapter 6: Excel Fundamentals
6.1 Shortcuts, Setup, and Navigation 6.2 Core Formulas and Error Handling 6.3 Named Ranges and Workbook Hygiene
8 Chapter 7: Excel Lookups and Financial Functions
7.1 Lookup Functions 7.2 Conditional Aggregations 7.3 Financial Functions
9 Chapter 8: Excel What-If Analysis and Auditing
8.1 Goal Seek and Data Tables 8.2 Formula Auditing and Protection
10 Chapter 9: Financial Modeling Guidelines
9.1 Model Structure and Layout 9.2 Color Conventions and Formatting 9.3 Integrity Checks and Documentation
11 Chapter 10: Three-Statement Modeling
10.1 Articulating the Three Statements 10.2 Building the Income Statement 10.3 Building the Balance Sheet and Cash Flow Statement
12 Chapter 11: Circularity and Model Audit
11.1 Circular References and Iteration 11.2 Auditing and Balancing a 3-Statement Model
13 Chapter 12: Operational Modeling
12.1 Revenue and Operating Drivers 12.2 Working Capital Modeling 12.3 Capex and Depreciation
14 Chapter 13: Debt Schedules, Scenarios, and Sensitivity
13.1 Debt and Interest Schedules 13.2 Scenario Analysis 13.3 Sensitivity Analysis
15 Chapter 14: Valuation Foundations
14.1 Valuation Methods and Enterprise Value 14.2 Unlevered Free Cash Flow
16 Chapter 15: DCF Valuation
15.1 DCF Structure, WACC, and Mid-Year Convention 15.2 Terminal Value and the Equity Bridge
17 Chapter 16: Comparable Valuation
16.1 Trading Comps and Multiples 16.2 Precedent Transactions and the Football Field
18 Chapter 17: Budgeting and Forecasting
17.1 Budget Types 17.2 Forecasting Techniques 17.3 Rolling Forecasts and Variance Analysis
19 Chapter 18: Presentation and Visuals
18.1 Chart Types and Selection 18.2 Dashboards and Data Visualization 18.3 PowerPoint and Pitchbooks 18.4 Presenting Model Outputs
20 Chapter 19: Professional Ethics and Qualitative Analysis
19.1 Professional Ethics 19.2 Qualitative Business Analysis
9.3 Integrity Checks and Documentation
Key Takeaways Explain This Topic AI
A CFI-style Checks sheet flags when ABS(Assets − Liabilities − Equity) exceeds a small tolerance (for example $0.5 thousand); Apex 2024A assets 7,151 equal L+E 7,151, so the BS-balance flag is 0.
Cash must tie: balance-sheet cash equals cash-flow ending cash — Apex 2024A both 1,651; a $1 thousand gap is an error flag, not rounding to ignore on a $000s model.
Pick one sign convention and keep it: this guide uses CFI-typical positive expenses (COGS 6,000) subtracted in subtotals (gross profit = revenue − COGS); mixed signs in the same P&L are a check failure.
Cover-sheet documentation includes version, model date, units, sources, purpose, and a color legend; Apex's file is versioned, dated 2026-08-20, and labeled $000s before anyone edits a driver.
Error flags are numeric 1/0 (or OK/ERROR) that sum to a dashboard of zero errors; IFERROR-away and hidden plugs are anti-documentation, not controls.
Last updated: August 2026
Checks are outputs, not decorations
Quick Answer: A CFI-aligned model has a Checks sheet (or a Checks block) that tests balance-sheet balance , cash ties , NI / retained-earnings ties , units , and sign convention . Flags are numeric (1 = error, 0 = OK) with a small ABS tolerance. The cover sheet records version, model date, units, sources, and a color legend. Apex 2024A balances at 7,151 of assets and L+E, with cash 1,651 on both the BS and the CF.
CFI's 2026 core path splits Financial Modeling Guidelines from Auditing and Balancing a 3-Statement Model . This section is the guidelines layer: what you install on day one so the later audit has somewhere to land. You do not wait until the BS is already broken to add a difference row.
Financial Modeling is about 30% of the published FMVA weight graphic, and Excel case studies are timed. A case that is internally pretty and does not balance is unfinished. The Checks sheet is the last output you read before you stop.
Sign convention: pick one and check it
Sign convention is a check , because mixed signs are how a SUM of the P&L double-counts or zeros out.
CFI-typical style used in this guide: store revenues as positives and expenses as positives , then subtract expenses in subtotals. Apex 2024A:
- Revenue 10,000 (positive input or formula)
- COGS 6,000 (positive; 60% × revenue)
- Gross profit =Revenue-COGS = 4,000
- OpEx 2,000 (positive)
- D&A 400 (positive)
- EBIT =GP-OpEx-DA = 1,600
Interest 132 is also stored positive and subtracted. Tax 367 is stored positive and subtracted. NI 1,101 is positive.
The alternative, negative expenses (COGS stored as −6,000 so a column SUM works without minuses), is internally valid if every expense line is negative . CFI-style teaching models usually prefer the positive expense + subtract in the total layout because stubs read like a published P&L (COGS is shown as 6,000, not −6,000) and because corkscrews already use explicit plus/minus lines.
Style COGS cell Gross profit Allowed?
- Positive expenses (this guide) 6,000 =Rev-COGS Yes — pick and keep
- Negative expenses −6,000 =SUM(Rev,COGS) Yes — only if every expense is negative
- Mixed 6,000 in 2024, −6,000 in 2025 Whatever still prints Never
On the cash-flow statement, outflows often display in parentheses via the custom format or via =-Capex . That is a cash-flow presentation choice, not a reason to store COGS as negative on the IS. Apex capex 500 stays a positive input on Assumptions; CF investing is =-Assumptions!D18 and displays (500) .
A Checks-sheet sign test can count whether expense lines are ≥ 0 (positive-expense style) or ≤ 0 (negative-expense style) and flag a mix. If 2025 COGS is −6,480 while 2024 COGS is 6,000, gross profit in 2025 becomes 10,800 − (−6,480) = 17,280 , which is nonsense, and the BS will not save you until cash is already wrong.
- The three ties that must hold
- 1. Balance sheet balances
- Assets = Liabilities + Equity
Apex 2024A: cash 1,651 + NWC 1,500 + net PP&E 4,000 = 7,151 . Debt 2,200 + equity 4,951 = 7,151 . Difference 0 .
Check formula (tolerance 0.5 thousand, so a 0.2 rounding crumb does not scream):
=IF(ABS(Assets-Liab-Equity)>0.5,1,0)
Use ABS . A test of Assets=Liab+Equity on floating-point Excel can fail on 0.0000001, or a test of Assets-Liab-Equity>0 misses a negative imbalance.
2. Cash ties
Ending cash on the cash-flow statement must equal cash on the balance sheet for the same column year.
Apex 2024A: Δcash 851 + opening cash 800 = 1,651 on the CF. BS cash 1,651 . Difference 0 .
If BS cash is 1,650 and CF ending cash is 1,651, the Checks sheet raises a cash-tie error . On a $000s model that $1 thousand is not "immaterial for FMVA." It is a missing line, a sign error on capex, or an off-by-one column. Turning on iteration will not heal a $1 gap that is not a revolver plug.
Also tie opening BS cash in year t to ending CF / BS cash in year t−1. Apex 2025E opening cash must be 1,651, not a restated 800.
3. Net income ties to equity
IS NI must be the amount the retained-earnings corkscrew adds.
Apex 2024A: opening equity 3,850 + NI 1,101 − dividends 0 = 4,951 . If the IS shows 1,101 and the RE rollforward adds 1,100, flag it.
- Check Apex 2024A test Pass if
- BS balances 7,151 − 7,151 ABS(diff) ≤ 0.5
- Cash tie BS cash 1,651 vs CF ending 1,651 ABS(diff) ≤ 0.5
- NI / RE tie IS NI 1,101 vs RE addition 1,101 ABS(diff) ≤ 0.5
- Units Header $000s on every sheet = Assumptions!B2 Exact match
- Sign Expense lines ≥ 0 (positive-expense style) No mix
- Circularity Iteration on only if a documented revolver loop exists Documented or off
Apex 2025E, for the same grid: revenue 10,800 , NI 1,221 , NWC 1,620 , PP&E 4,100 , Δcash 1,001 , ending cash 2,652 , assets 8,372 = L+E 8,372 . Copy the same check formulas into column D. That is the 9.1 copy-across rule applied to controls.
Error flags you can sum
Store each check as 1 (error) or 0 (OK) , then:
Errors = SUM(Checks!C5:C12)
The dashboard on Cover or Checks shows Errors: 0 . Conditional formatting can paint the row red when the flag is 1, but the number is what you read in a second window. Do not rely on color alone (9.2).
IFERROR(...,0) is not a check. Wrapping the BS difference in IFERROR hides a #REF! from a deleted debt schedule and reports a clean zero. The correct alarm is the #REF! or a flag that tests ISERROR and returns 1.
Hidden plugs (white font, a 1,651 cash line that is actually =Liab+Equity-otherAssets ) can force the BS to "balance" while the CF does not tie. CFI-transparent models show the plug (often a revolver) on a corkscrew and still run the cash-tie check. If the plug is cash itself, the cash-tie check is how you catch a circularity or a missing NI.
Units flag: =IF(Assumptions!B2<>IS!B2,1,0) and the same vs BS and CF. If someone types millions on the IS header and thousands on Assumptions, this fires before you forecast.
Driver status: historical columns (2024A) are mostly blue actuals; forecast columns are formulas. A check can use Go To Special mentally: constants in D:F on the IS (other than 0) are suspect. CFI's guidelines course includes driver status — actual vs forecast — so you do not overwrite 2024A with a growth formula or leave 2027E as a typed actual.
Circularity is managed, not wished away. If the case uses a revolver whose interest depends on the plug, document iteration on on the cover (max iterations and maximum change). CFI's guidelines course treats circularity as something to control . Accidental circularity (a cell pointing at itself) is a Checks miss: the status bar says Circular References and the BS will not settle. The next chapter in this guide covers iteration mechanics; the guidelines rule is: do not enable iteration to silence a #DIV/0! or a $1 cash gap .
Macros are not an integrity system. CFI's view in this course is to avoid macros in the model. Protection ( Protect Sheet / Protect Workbook structure ) can lock calculation cells after the model is done so a user only edits blue inputs. On a timed FMVA case, do not spend minutes setting passwords; do spend seconds not overwriting green cells.
Cover sheet: version, sources, units, date
Documentation is how a file survives contact with another analyst — or with you after the clock has run. CFI-aligned cover contents:
Field Apex example Why it is there
Model name / purpose Apex Components 3-statement forecast — can operations fund capex? Design-backward reminder
- Version 1.2 Distinguishes the file from Apex_v1.1 sent yesterday
- Model date 2026-08-20 As-of date of actuals and assumptions
- Units $000s Same as the global marker
- Author / reviewer Initials Accountability
- Sources FY2024 management pack; tax rate from 10-K note 14 Blue inputs are not invented
- Color legend Blue input / black same-sheet / green cross-sheet 9.2 contract
- Iteration Off (no revolver loop in this tiny file) Circularity status
- Sheet index Hyperlinks to Assumptions, IS, BS, CF, Checks Navigation without macros
Sources matter on the exam when a case states "use the 25% statutory rate" and a leftover 21% sits in blue. The cover (or a comment on Assumptions!C20) cites the rate. If the source is "management growth 8%," write that next to the 8% — still a blue input, but not an anonymous 8%.
Version and date stop you from submitting an old file. If actuals are through 2024 and today is 2026-08-20, the cover says so. A model dated 2023 with 2024A labeled as forecast is a documentation fail even if the formulas copy.
Print the cover as page 1. CFI's print-settings lesson exists so the units line and the color legend appear on the statements, not only in a hidden named range.
Worked failure: the $1 cash miss
Suppose Apex 2024A CF ending cash is 1,651 and someone types BS cash as 1,650 (blue, on the BS — already a guidelines miss; cash should be a formula from the CF). Checks:
- CashTie = IF(ABS(1650-1651)>0.5,1,0) → 1
- Errors = 1
Do not add $1 of revenue to absorb it. Do not turn on iteration. Trace: BS cash should be =CF ending cash (green). Restore the link; both read 1,651; flag returns 0.
A second failure: COGS typed as −6,000 in 2024 only. Gross profit becomes 16,000, tax and NI explode, BS equity no longer matches unless you plug. The sign check fires even before you finish the CF. That is the point of installing Checks on day one.
On the FMVA final, if a case study still has Errors ≥ 1 at minute 45, you know the three statements do not articulate. CFI's pacing (about 45 minutes per case, 60 at most) includes time to read the Checks sheet . A model without one forces you to subtract assets from L+E by eye — slower, and easier to miss a $1 thousand.