Procedure Used for an Oil and Gas Audit
The wells with the largest expenditures are selected first and the wells with the smaller total expenditures can be sampled. One of the most effective ways to start the audit process is for one of the investors to contact all of the other investors before we send out ballots for their approval. That way we send ballots to the right person and they are expecting the ballot. The investors sign the ballots which will allow the audit cost to be fairly shared by all the investors. We obtain a copy the partners' JOA from one of the investors and review it. We obtain any information the partners have developed to benefit and expedite the audit.
We need know how many wells and how much money was charged for each of the wells. Give us an idea of how much time we need to reserve with the Operator. For one well, it usually takes about 2.5 days to review the operator's records and 2.5 days to review the charges. Obviously, more expensive wells take longer due to the larger number of individual charges that have to be reviewed. The on-location audit is at least: one auditor, per week, per well.
We contact the Operator and request a mutually convenient time and a database. Any revenue audit (usually feast or famine) should be done separately since it deals with totally different operator employees, audit procedures and objectives. With the database we can send the operator a list of documents we would like to have pulled in advance for the review. Audits are usually conducted in the operator's office since all the records are filed there. Sometimes audits can be done remotely if the operator has this set up.
We initiate the audit and ask for early credits, for example, obvious coding errors. After the on-location audit, we perform wrap up work and an audit report which is sent to the operator. The operator will sometimes reply quickly and some will wait for the full six months which COPAS usually has allowed in the past. We then reply to the operator's answer to our audit report. The investors are invoiced by us for preliminary work, on-location work and wrap-up, report work.
Normally, we do not charge anything for follow up work - where most others do, as they should. However, the reason we do this is for: goodwill and because in the past, operators have tried to bypass us in order to try to convince the investors to drop some of our good exceptions.