Description: The US Securities and Exchange Commission (SEC) is conducting an investigation into the way Exxon has been accounting for its oil reserves. The SEC – plus a number of state authorities – have been posing questions as to why Exxon has not joined other oil and gas producers in writing down the value of assets in the current prolonged slump in petroleum prices. Exxon has said future cash flow projections mean that no writedowns are necessary.
Date: September 20, 2016
1) What is your view of this story?
2) What are some of the key considerations in accounting for oil reserves?
3) If you were an auditor of an oil company like Exxon, what would be some of the risks you would have to consider in auditing the oil reserves? How would you address those risks?