Practical Financial Modelling : A Guide to Current Practice

The previous chapter set out some suggestions concerning model layout and structure. If accepted and implemented, these suggestions take the form of rules, and when using a rule-based methodology we should always be able to check and confirm that such rules are being followed. With the principle of error reduction we want to anticipate potential errors and to identify them as early as possible. This chapter sets out the requirement for us to incorporate quality control into the model development process. If left too late, minor errors have a habit of compounding themselves and they become very difficult to untangle.
If you are reading this book from start to finish, this chapter appears to sit uneasily in the sequence: the previous chapter looked at getting started and setting out the structure of the model, and the following chapters look at the formulae and functions and model use. But here we are concerned about the various checks and tests that we will be applying as we start the number crunching, and we need to appreciate that in some of this we will be a little ahead of ourselves, and the significance of a specific test (e.g. the iteration status) will not become apparent until we cover the related topic in detail later in the book.
The demonstration workbooks for this chapter are in the Chapter 2: Quality Control folder on the CD-ROM.
There are several taxonomies of the types of error which may be found in spreadsheets...