- 10 Marks
AAA – May 2017 – L3 – Q4a – Assurance services | Professional responsibility and liability
Discuss the considerations before accepting an engagement to certify benchmark petroleum revenue and the issues related to relying on an independent expert’s certification.
Question
Your firm has been contracted by the Office of the Auditor General (AG) of Ghana to provide the Ministry of Finance (MoF) with the certification of the Projection of Benchmark Petroleum Revenue for 2016.
The Petroleum Revenue Management Act (PRMA), 2011 (Act 815) became law in Ghana on 11 April 2011, and Section 17 of the PRMA requires the Minister responsible for Finance to make a projection of the amount of petroleum revenue that would accrue to the Government of Ghana in the coming year, not later than 1 September of each year.
The first schedule of the Act mandates an independent expert to certify the projection of the Benchmark Petroleum Revenue by the Minister before it would be used in the National Budget for the coming year.
The two major issues in the projection are the quantity of Oil and Gas expected and the world market price at which the oil and gas will be valued.
As part of the documents to be used in performing this assignment, MoF has given you:
- Projection of the Benchmark Petroleum Revenue from oil and gas for 2016, and
- Certification of the Estimate of the Oil and Gas production for 2016 from the existing and expected oil and gas producing fields in Ghana.
The first schedule of the Act prescribes a formula for the calculation of the Average Unit Price for Crude Oil and Natural Gas on the International Market to be used for the year. The certification in the Estimate of the Oil and Gas production was issued by an independent expert in the Oil and Gas industry.
Required:
i) State FOUR issues your firm will consider in order to decide whether or not to accept this engagement from the Office of the Auditor General. (4 marks)
ii) If your firm decides to accept the engagement, state FOUR issues your firm will consider in order to place reliance on the certification issued by the independent expert in the Oil and Gas industry in performing the engagement. (4 marks)
iii) State TWO audit procedures your firm would perform to determine that the Average Unit Price for Crude Oil and Natural Gas on the International Market for 2016 used by MoF in the Projection of the Benchmark Petroleum Revenue for 2016 is fairly stated. (2 marks)
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