Explorer

The issuer engaged specialists to estimate its oil and gas reserves (“reserve estimates”) which were then used in the (1) calculation of depreciation depletion and amortization and (2) impairment analysis of long-lived assets. The company's specialists used financial and non-financial data and assumptions deemed significant by the firm to develop the reserve estimates in the reserve report. The firm selected for testing a control that consisted of the issuer's review and approval of the final reserve estimates provided by the company's specialists. The firm did not identify when testing the design of this control that the control owners did not (1) evaluate the reasonableness of the non-financial assumptions developed by the issuer and/or the company's specialists and used by the company's specialists to develop the reserve estimates and (2) evaluate the appropriateness of the methods used by company's specialists to develop the reserve estimates. (AS 2201.42)

The issuer engaged specialists to estimate its oil and gas reserves (“reserve estimates”) which were then used in the (1) calculation of depreciation depletion and amortization and (2) impairment analysis of long-lived assets. The company's specialists used financial and non-financial data and assumptions deemed significant by the firm to develop the reserve estimates in the reserve report. The firm's approach for substantively testing the reserve estimates was to test the issuer's process. The following deficiency was identified: • The firm did not evaluate the reasonableness of the significant non-financial assumptions developed by the issuer and/or the company's specialists and used by the company's specialists to develop the reserve estimates. (AS 1105.A8b; AS 2501.16) • The firm did not evaluate whether the methods used by the company's specialists to develop the reserve estimates were appropriate under the circumstances taking into account the requirements of the applicable financial reporting framework beyond inquiry of the methods used with the company's specialists. (AS 1105.A8c)

The issuer engaged specialists to estimate its oil and gas reserves (“reserve estimates”) which were then used in the (1) calculation of depreciation depletion and amortization and (2) impairment analysis of long-lived assets. The company's specialists used financial and non-financial data and assumptions deemed significant by the firm to develop the reserve estimates in the reserve report. The firm's approach for substantively testing the reserve estimates was to test the issuer's process. The following deficiency was identified: • The firm did not evaluate the reasonableness of the significant non-financial assumptions developed by the issuer and/or the company's specialists and used by the company's specialists to develop the reserve estimates. (AS 1105.A8b; AS 2501.16) • The firm did not evaluate whether the methods used by the company's specialists to develop the reserve estimates were appropriate under the circumstances taking into account the requirements of the applicable financial reporting framework beyond inquiry of the methods used with the company's specialists. (AS 1105.A8c)

The issuer utilized internal specialists (company's employed specialists) including reserve engineers to estimate its oil and gas reserves (“reserve estimates”) which were then used in the (1) calculation of depreciation depletion and amortization and (2) impairment analysis of long-lived assets. The issuer also engaged external reserve engineers (company's engaged specialists) to audit and evaluate its proven reserves on a rotational basis. The firm's approach for substantively testing the reserve estimates was to test the issuer's process. The firm did not perform sufficient procedures to test the reserve estimates because the firm did not: · Evaluate the reasonableness of the production profiles which were considered significant assumptions by the firm developed by the company's employed specialists and used to develop the reserve estimates; (AS 1105.A8b)

The issuer performed an impairment analysis for certain long-lived assets using discounted cash flow forecasts that included the estimate of total revenues. The estimate of total revenues was also used in determining amortization expense associated with these assets. The following deficiencies were identified: - The firm did not perform any substantive procedures beyond inquiry of management and reading an issuer-prepared memorandum to evaluate the reasonableness of the significant assumptions underlying estimated total revenues including taking into account factors affecting the issuer's intent and ability to carry out those assumptions. (AS 2501.16 and .17)

The issuer engaged a specialist to determine the fair value of certain long-lived assets for use in the issuer's impairment analysis. The firm did not evaluate the following assumptions underlying the expected future cash flows that the issuer provided to the specialist: (1) the revenue gross profit margin and operating expense projections beyond the first year and (2) the period of the expected future cash flows which was different from the remaining estimated useful life of the assets. Further the firm did not evaluate the effects of the negative contribution margin in the current year on the operating expense projections. (AS 1210.12; AS 2810.03)

During the year the issuer identified indicators of possible impairment for certain long-lived assets and engaged a specialist to determine the fair values of these assets. The firm's approach for substantively testing the fair values of these assets was to test the issuer's process. The following deficiencies were identified: - For one asset group the firm did not evaluate whether the significant assumptions developed by the company's specialist were consistent with relevant information. (AS 1105.A8b)

During the year the issuer identified indicators of possible impairment for certain long-lived assets and engaged a specialist to determine the fair values of these assets. The firm's approach for substantively testing the fair values of these assets was to test the issuer's process. The following deficiencies were identified: - For another asset group the firm did not perform any procedures to evaluate the reasonableness of the significant assumptions developed by the company's specialist. (AS 1105.A8b)

The issuer engaged a specialist to develop significant inputs used to determine the fair value of certain long-lived assets. The following deficiencies were identified: · The firm did not perform any procedures to evaluate the reasonableness of certain significant assumptions developed by the company's specialist and the issuer. (AS 1105.A8b; AS 2501.16)

The issuer engaged an external specialist to assist in the valuation of certain other long-lived assets. The following deficiencies were identified: · The firm did not evaluate the reasonableness of certain significant assumptions developed by the company's specialist. (AS 1105.A8b)

The issuer engaged an external specialist to assist in the valuation of certain other long-lived assets. The following deficiencies were identified: · The firm did not sufficiently evaluate the reasonableness of another significant assumption because it limited its procedures to comparing the assumption to various external information. Further the firm did not evaluate the relevance and reliability of the information. (AS 1105.04 .06 and .A8b)