With the introduction of International Financial Reporting Standards (IFRS) in Canada the financial landscape will be changing for publicly listed companies in January 2011 or just a little over a year. As such, companies would be wise to review not only how they are audited and how they will report, but also who is actually doing their financial audits for them.
Listed below are ten questions that you should ask your auditor. I will go into more detail as to why you should ask these questions in subsequent posts.
Top 10 Questions An Oil and Gas Company Should Ask Their Auditors
1. How do your auditors authenticate your master asset list or well list to ensure accuracy?
2. How do your auditors tie up every cost center to your assets?
3. How do your auditors validate that your working interests are accurate in all your cost centers?
4. How do your auditors validate that you are receiving:
a. All revenue due to you?
b. All royalties due to you?
c. All transportation, processing fees and compression fees due to you?
5. How do your auditors validate that you are not overpaying:
a. Capital?
b. Operating expenses?
c. Royalties?
6. How do your auditors authenticate your Asset Retirement Obligation’s and Offset well liabilities?
7. How do your auditors tie up reserves to cash generating units?
8. Do your auditors authenticate well counts for Annual Information Form’s?
9. How can your auditors potentially make your IFRS conversion pay for itself and add asset value to your company?
10. How will your auditors ensure your Cash Generating Unit’s will be authenticated?
The numbers for the top 5 audit firms in Calgary are listed below.
Deloitte – 403-267-1700
E&Y – 403-290-4100
KPMG – 403-777-9999
PWC - 403-509-7500
MNP - 403-444-0150
Give your auditor a call and see if they can answer these questions for you. If they can not provide a thorough check against all results then you should ask them how they are going to do this to ensure accuracy as you move towards IFRS.
Argentis Group can perform a full array of operational audits to assist companies in identifying opportunities to help offset the costs of IFRS for oil and gas companies and also allow you to ensure financial accuracy. Typically, we will find enough value for your company to more that offset the costs and to make you transition to IFRS smoother and potentially allow for greater overall financial strength.
These opinions are mine and may not reflect your view. If you would like to contact me, then please feel free to do so at info@argentis-group.com. Argentis Group assists oil and gas companies with operational audits to identify areas to reduce costs, increase revenues and increase the overall asset value of an oil and gas company.
One of the emphsises for the convergence of IAS to IFRs is to ensure transparency to ensure that there is no concealment of facts especially the incidenences of errors & frauds (intentional or unintentional) and the mismanagement, keeping in view the Enron & Dot Com cases. The ten questionaire set in the article has left out the important and vital aspects pointed in this comment.
ReplyDeleteGreat comment. I didn't think about the aspect of mismanagement, I was more coming from the side of data errors and how the can have an impact on the overall financial well being of a company. Since audit firms typically don't have the tools to do a thorough vetting of the information, there is opportunity to use the IFRS conversion as a fresh start.
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