1 FOIA Litigation Everything you wanted to know but were afraid to ask.
WHAT YOU ALWAYS WANTED TO KNOW ABOUT AUDITING BUT WERE AFRAID TO ASK
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Transcript of WHAT YOU ALWAYS WANTED TO KNOW ABOUT AUDITING BUT WERE AFRAID TO ASK
WHAT YOU ALWAYS WHAT YOU ALWAYS WANTED TO KNOW WANTED TO KNOW
ABOUT AUDITING BUT ABOUT AUDITING BUT WERE AFRAID TO ASKWERE AFRAID TO ASK
PASPB Technical SessionPASPB Technical Session
October 31, 2006October 31, 2006
WHYWHY
DollarsDollars Unique AgreementsUnique Agreements TrustTrust HistoryHistory InterestInterest Cost to conduct auditCost to conduct audit Just because we canJust because we can
AUDIT PROVISIONSAUDIT PROVISIONS
Contained in the Accounting Contained in the Accounting ProcedureProcedure
24-month limitation on auditing24-month limitation on auditing Non-Operators will join togetherNon-Operators will join together Operator bears no portion of cost Operator bears no portion of cost
NON-OPERATOR’S NON-OPERATOR’S RESPONSIBILITYRESPONSIBILITY
Determine time needed for field workDetermine time needed for field work Contact the operator and scheduleContact the operator and schedule Authorize someone to conduct auditAuthorize someone to conduct audit Confirmation letter to operatorConfirmation letter to operator Request documentationRequest documentation Prepare ballot letter to other non-Prepare ballot letter to other non-
operatorsoperators
NON-OPERATOR’S INTERNAL NON-OPERATOR’S INTERNAL PREPARATIONPREPARATION
Joint Operating AgreementJoint Operating Agreement Review Accounting ProcedureReview Accounting Procedure Joint Interest BillingsJoint Interest Billings Drilling Report, if applicableDrilling Report, if applicable Authority for ExpendituresAuthority for Expenditures Any other agreements with operatorAny other agreements with operator
OPERATOR’S OPERATOR’S RESPONSIBILITYRESPONSIBILITY
Work with audit team to schedule timeWork with audit team to schedule time Provide confirmation letterProvide confirmation letter Provide a list of current Working Provide a list of current Working
Interest OwnersInterest Owners Provide JADEProvide JADE Make documentation available to Make documentation available to
auditors upon arrivalauditors upon arrival Have adequate facilitiesHave adequate facilities
AUDITOR’S AUDITOR’S RESPONSIBILITIESRESPONSIBILITIES
SCOPESCOPE
Capture as much as possibleCapture as much as possible Don’t ‘spend a dollar to chase a Don’t ‘spend a dollar to chase a
dime’dime’ Don’t go under scope unless a Don’t go under scope unless a
systemic problemsystemic problem Be as fair as possible to both sidesBe as fair as possible to both sides
REVIEW AGREEMENTREVIEW AGREEMENT
Look for changes to basic JOALook for changes to basic JOA Note date of agreementNote date of agreement Check for how to handle title Check for how to handle title
opinionsopinions Check for version of Accounting Check for version of Accounting
ProcedureProcedure Check insurance provisionsCheck insurance provisions
ACCOUNTING PROCEDUREACCOUNTING PROCEDURE
Look for changes to basic procedureLook for changes to basic procedure Check offsite technical electionCheck offsite technical election Check overhead ratesCheck overhead rates Look at overhead termsLook at overhead terms Check major construction overheadCheck major construction overhead
DRILLING REPORTDRILLING REPORT
Note datesNote dates OperationsOperations BitsBits TubularsTubulars VendorsVendors Tour reportTour report Completion report if availableCompletion report if available
GETTING STARTEDGETTING STARTED
Compare JADE to JIB’sCompare JADE to JIB’s Keep original JADE and just copy Keep original JADE and just copy
workpapers overworkpapers over Eliminate offsetsEliminate offsets Eliminate under scopeEliminate under scope
VERIFY CHARGESVERIFY CHARGES
Verify invoices over scopeVerify invoices over scope– PropertyProperty– DatesDates– ActivityActivity– Comply with JOAComply with JOA– Comply with Accounting ProcedureComply with Accounting Procedure– Note invoice numberNote invoice number– Make sure amount agrees with chargeMake sure amount agrees with charge
ADDITIONAL VERIFICATIONADDITIONAL VERIFICATION
Double check large invoices against Double check large invoices against drilling reportdrilling report
Look for duplicate paymentsLook for duplicate payments Check field tickets supporting Check field tickets supporting
invoicesinvoices Check drilling charges against drilling Check drilling charges against drilling
contractcontract
OVERHEADOVERHEAD
Drilling overheadDrilling overhead– Check spud or “on location” datesCheck spud or “on location” dates– Calculate escalationCalculate escalation
Producing overheadProducing overhead– Check month of first productionCheck month of first production– Calculate escalationCalculate escalation
RECONCILIATIONSRECONCILIATIONS
BitsBits– Pull from tour reportsPull from tour reports– Verify serial numbers against invoicesVerify serial numbers against invoices
TubularsTubulars– Pull from drilling reports or completion Pull from drilling reports or completion
reports filed with authoritiesreports filed with authorities– Gather information from transportation Gather information from transportation
invoicesinvoices
RECONCILIATIONSRECONCILIATIONS
DieselDiesel– Charges while rig on locationCharges while rig on location– In Texas, check sales taxIn Texas, check sales tax– Offshore transfersOffshore transfers
ChemicalsChemicals– Look for credits from mud companyLook for credits from mud company– Offshore transfersOffshore transfers
RECONCILIATIONSRECONCILIATIONS
Surface equipmentSurface equipment– ReasonableReasonable– Put together the storyPut together the story
BoatsBoats– Property notedProperty noted– How allocatedHow allocated
HelicoptersHelicopters– Property notesProperty notes– How allocatedHow allocated
PERSONNELPERSONNEL
Payroll recordsPayroll records– Timesheets if time is allocatedTimesheets if time is allocated– Employee benefits rateEmployee benefits rate– Vehicle expenseVehicle expense
Tech laborTech labor– On site & off siteOn site & off site– QualificationsQualifications– Specific condition or problemSpecific condition or problem
OTHEROTHER
InsuranceInsurance– Complies with JOAComplies with JOA
Operator owned facilitiesOperator owned facilities– Complies with Accounting ProcedureComplies with Accounting Procedure
LegalLegal– Generally no ‘in-house’ attorneys chargeableGenerally no ‘in-house’ attorneys chargeable
UnusualUnusual– Helicopter charges for a West Texas propertyHelicopter charges for a West Texas property
INFORMATION REQUESTSINFORMATION REQUESTS
Be specificBe specific Adequate documentationAdequate documentation Follow Operator’s guidelinesFollow Operator’s guidelines
– ElectronicElectronic– Hard copyHard copy– Copy of JADECopy of JADE
ExceptionsExceptions
Be specificBe specific Quote JOA, Accounting Procedure, Quote JOA, Accounting Procedure,
contracts as applicablecontracts as applicable Adequate documentationAdequate documentation Copy of JADE the Operator furnished Copy of JADE the Operator furnished
as supportas support Leave field exception with Operator Leave field exception with Operator
before leaving locationbefore leaving location
AUDIT REPORTAUDIT REPORT
Actual ReportActual Report– Send out within 90 days of field workSend out within 90 days of field work– OR by December 31OR by December 31stst if late in year if late in year– Note amount of $’s auditedNote amount of $’s audited– OK except for......OK except for......
Operator’s ResponseOperator’s Response– With 180 days of receipt or in violation With 180 days of receipt or in violation
of most agreementsof most agreements
CONTINUING PROBLEMSCONTINUING PROBLEMS
MaterialsMaterials MiscodesMiscodes Technical LaborTechnical Labor LegalLegal Outside Landman ChargesOutside Landman Charges Overhead ChargesOverhead Charges
TOOLSTOOLS
ComputerComputer PrinterPrinter Lots of Office SuppliesLots of Office Supplies COPAS CDCOPAS CD Flash DriveFlash Drive Cell PhoneCell Phone Sense of Humor !!!Sense of Humor !!!
TAKE TIME FOR SOME FUNTAKE TIME FOR SOME FUN
THE ENDTHE END