I'v seen the process, and I know of what the process is in one of the Big Firms. There is almost always someone above you to check your work, because the drudgery and pain of a model is farmed of to an analyst. The associate/seniors take a look at the work, and finally there is almost always a sanity check which is not trivial.
All of the major finance firms have lots of people who've burnt their fingers with excel mistakes.
They know that their analysts and their associates can and will break something. (Heck the analysts do so regularly, I'm sure there are several analysts freaking out over REF errors right now)
The London Whale wasn't just because mistakes in excel. There were several things that broke here.
The assumption that the users are unsohpisticated in the use of excel is a bit naiive. If anything, the most arcane applications and commands of excel will likely be best known in the major banking firms.
But still, spreadsheets are full of normal human errors, and based on flawed assumptions, with little oversight, and they control huge amounts of money in novel instruments.
> "This market grew very quickly due to the ease with which it was possible to design and promulgate opaque financial instruments based on large spreadsheets with critical flaws in their key assumptions." Grenville J. Croll, 2009 [http://arxiv.org/abs/0908.4420]*
> "Complex financial instruments such as CDO’s are implemented within, and valued by, large and complex spreadsheets. CDO’s and other credit derivatives played a leading role in collapse of the global financial system”. Grenville Croll [http://arxiv.org/abs/0908.4420]*
> “Spreadsheets have been shown to be fallible, yet they underpin the operation of the financial system. If the uncontrolled use of spreadsheets continues to occur in highly leveraged markets and companies, it is only a matter of time before another ‘Black Swan’ event occurs [Taleb, 2001], causing catastrophic loss. It is completely within the realms of possibility that a single, large, complex but erroneous spreadsheet could directly cause the accidental loss of a corporation or institution, significantly damaging the City of London’s reputation”. Grenville J. Croll, 2009 [http://arxiv.org/abs/0709.4063]*