Pelican Oil is a publicly traded oil and gas company specializing in global exploration and offshore drilling.
Question:
Pelican Oil is a publicly traded oil and gas company specializing in global exploration and offshore drilling. Even though Pelican has been operating for almost 30 years, it is still considered a “newcomer” in the industry. The key leaders in the industry are large conglomerates that have been operating for over 100 years.
Over the last 18 months, the global supply of oil has exceeded the demand, resulting in a significant drop in oil prices. A drop in oil prices means decreased revenue for oil and gas companies of all sizes. For smaller companies in the industry like Pelican, significant drops in oil prices are harder to withstand. (The larger conglomerates are so well diversified that they have an easier time withstanding fluctuations in the oil market.) In response to the drop in oil prices and decreased demand, Pelican has temporarily suspended drilling operations and laid off employees in the field and in the corporate office. You are preparing for the upcoming audit of Pelican. Looking at the interim financial statements for the current year, you calculate an 18% decrease in revenue compared to the same interim period from the previous year. You have been reading in the global financial news that the drop in oil prices has led to increased fraud in the industry, with much of the fraud being committed by senior managers. The audit team is meeting tomorrow to have a brainstorming session about fraud risk for Pelican Oil.
Required
To prepare for the brainstorming meeting, research online the types of fraud that occur in the oil and gas industry. Assess the risk of fraud for Pelican Oil by discussing the fraud risk factors that may be present.
Financial StatementsFinancial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
Step by Step Answer:
Auditing A Practical Approach with Data Analytics
ISBN: 978-1119401742
1st edition
Authors: Raymond N. Johnson, Laura Davis Wiley, Robyn Moroney, Fiona Campbell, Jane Hamilton