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Unformatted text preview: etermine their reserves (subject matter).
There are established criteria todetermine when a reserve may be considered to be proven which the
professionalaccountant in public practice determines to be suitable criteria for the engagement.
The proven reserves for each company as at December 31, 20X0 were as follows:
Proven oil reserves
thousand of barrels
Company 1 5,200 Company 2 725 Company 3 3,260 Company 4 15,000 Company 5 6,700 Company 6 39,126 Company 7 345 Company 8 175 Company 9 24,135 Company 10 9,635 Total 104,301 The engagement could be structured in differing ways:
A1 Each company measures its reserves and provides an assertion to the firmand to intended users. A2 An entity other than the companies measures the reserves and provides anassertion to the firm
and to intended users. Direct Reporting Engagements
D1 Each company measures the reserves and provides the firm with a writtenrepresentation that
measures its reserves against the established criteriafor measuring proven reserves. The
representation is not available to theintended users. D2 The firm directly measures the reserves of some of the companies. Application of Approach
A1 Each company measures its reserves and provides an assertion to the firmand to intended users.
111 There are several responsible parties in this engagement (Companies 1–10). Whendetermining whether it
is necessary to apply the independence provisions to all of thecompanies, the firm may take into account
whether an interest or relationship with aparticular company would create a threat to independence that is
not at an acceptablelevel. This will take into account factors such as:
• The materiality of the company’s proven reserves in relation to the totalreserves to be reported on;
and • The degree of public interest associated with the engagement (paragraph291.28). For example Company 8 accounts for 0.17% of the total reserves, therefore abusiness relationship or
interest with Company 8 would create less of a threat than asimilar relationship with Company 6, which
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This document was uploaded on 04/03/2014.
- Spring '14