What audit inside the DCF process should regularly occur?

The regular review and validation of all market data and assumptions used in cash flow projections is a critical audit within the DCF (Discounted Cash Flow) process because accurate and reliable inputs directly influence the integrity of the projections. These projections form the backbone of the DCF analysis, which is used to estimate the present value of future cash flows.

If the underlying market data or assumptions about growth rates, discount rates, or economic conditions are flawed, the resulting valuation could mislead decision-makers and investors. This regular scrutiny helps to ensure that the DCF model reflects current market realities, trends, and expectations. By validating these inputs regularly, the analysis can be adjusted to remain relevant and accurate, thereby enhancing decision-making effectiveness and minimizing financial risk.

Other options, while important in their own right, do not focus as directly on the foundational aspects that influence the model's final outputs. For instance, conducting user acceptance testing and ensuring model accessibility are more about operational functionality and stakeholder engagement rather than the accuracy of financial forecasts. Scheduling reviews might help maintain oversight but does not guarantee that the fundamental data driving the DCF process is current or correct.