workflow-ma-three-statement-tieout

# Model Audit — Three-Statement Tie-Out and Balance-Sheet Integrity ## What this skill covers Verification that a three-statement model (Income Statement, Balance Sheet, Cash Flow) articulates correctly. Uses `three_statement_model` as the 128-bit Decimal ground truth and checks the four canonical linkage rules, balance-sheet integrity at every period, and working capital / ROE trajectory plausibility. ## Tool references | Tool | Use | |------|-----| | `three_statement_model` | IS/BS/CF articulation ground truth | | `working_capital` | DSO/DIO/DPO/CCC sanity check | | `variance_analysis` | Projection vs trailing actuals variance | | `dupont_analysis` | ROE decomposition for trajectory plausibility | ## Workflow ### Step 1 — Independent rebuild via three_statement_model Call `three_statement_model` with the model's stated assumptions (revenue growth, margin structure, capex, D&A, working capital drivers, interest rate, tax rate, dividends, debt amortisation). The tool resolves circular references in 128-bit Decimal and is the ground truth for IS/BS/CF articulation. Compare line by line for every forecast period: - Income Statement: Revenue, EBITDA, EBIT, Interest, EBT, Tax, Net Income. - Balance Sheet: all asset and liability categories, equity components. - Cash Flow: operating, investing, financing sections; net change in cash. Any material discrepancy (>0.1% or >$1k, whichever is lower) is a finding. ### Step 2 — Balance sheet balance check For every forecast period, verify: ``` Total Assets = Total Liabilities + Total Equity ``` **Tolerance: zero.** The `three_statement_model` tool produces a perfectly balanced balance sheet. Any model period where Assets ≠ Liabilities + Equity is a **Critical** finding — the model is broken for that period. ### Step 3 — Four canonical articulation rules Verify each rule for every forecast period: | Rule | Check | |------|-------| | 1. Net income → retained earnings | Net income on IS = change in retained earnings on BS (before dividends) | | 2. D&A → PP&E | D&A on IS = D&A in CF operating section; ending PP&E on BS = opening PP&E + Capex - D&A | | 3. Working capital changes → BS | Each working capital line on CF ties to the corresponding BS current asset/liability movement | | 4. Ending cash → BS | Opening cash + total net CF = Ending cash on BS, exactly | A failure in any rule for any period is a **Critical** finding. ### Step 4 — Working capital sanity check Call `working_capital` with projected balance sheet figures to compute DSO, DIO, DPO, and Cash Conversion Cycle (CCC) for each forecast year. Flag any metric that moves >10 days vs the trailing historical average without an explicit driver explanation in the model. Plausible drivers (new payment terms, geographic mix shift, procurement programme) must be documented; undocumented movement of >10 days is a **Major** finding. ### Step 5 — DuPont decomposition Call `dupont_analysis` on each forecast year's projected ROE. Decompose into: - Net margin × Asset turnover × Leverage multiplier. Flag implausible trajectories: - Net margin expansion >500bps with no stated driver: **Major**. - Asset turnover improvement without capex reduction or revenue acceleration: **Major**. - Leverage multiplier change without corresponding debt movement: **Major**. ### Step 6 — Variance check against trailing actuals Call `variance_analysis` comparing the model's projections to trailing actuals. Flag every line where the Y1 projection implies a >5% variance from the trailing actuals trend without a driver explanation in the model. ## Output format ``` THREE-STATEMENT TIE-OUT REPORT -------------------------------- Model: [name / file reference] BALANCE SHEET INTEGRITY: PASS / FAIL | Period | Assets | Liabilities + Equity | Delta | Status | |--------|--------|-----------------------|-------|--------| | FY2025 | 4,823 | 4,823 | 0 | PASS | | FY2026 | 5,102 | 5,105 | (3) | CRITICAL FAIL | ARTICULATION RULES: PASS / FAIL per rule per period | Rule | FY2025 | FY2026 | FY2027 | |------|--------|--------|--------| | 1. NI → Retained Earnings | PASS | PASS | PASS | | 2. D&A → PP&E | PASS | FAIL | PASS | | 3. WC changes | PASS | PASS | PASS | | 4. Ending cash | PASS | FAIL | PASS | WORKING CAPITAL SANITY | Metric | Historical avg | FY2026 | FY2027 | Finding | |--------|---------------|--------|--------|---------| | DSO | 42 days | 44 days | 55 days | MAJOR: +13 days FY2027, no driver | FINDINGS SUMMARY | # | Finding | Rule/Step | Period | Severity | |---|---------|-----------|--------|----------| | 1 | BS does not balance (delta $3k) | Step 2 | FY2026 | Critical | | 2 | D&A → PP&E articulation broken | Rule 2 | FY2026 | Critical | | 3 | DSO +13 days without driver | WC sanity | FY2027 | Major | ``` ## Quality gates - Balance sheet checked at zero tolerance — no rounding tolerance accepted. - All four articulation rules checked for every forecast period — no periods skipped. - Working capital metrics computed for every period with ≥1 historical period for comparison. - DuPont computed for every period where ROE data is available. - Findings table sorted: Critical first. ## Related skills - `workflow-ma-rederivation` — re-derives operating model numbers against corp-finance-mcp tools; three-statement tie-out confirms structural integrity, rederivation validates the numbers - `workflow-ma-link-tracing` — the dependency map identifies which cells feed the BS/CF and explains articulation breaks - `workflow-ma-formula-consistency` — formula breaks are a common cause of articulation failures ## Routing **Primary agent:** `cfa-chief-analyst`