Capabilities List

Joint Venture Advisory and Audit Services

Joint Interest and Contract Audits
Foreign Operations' auditors complete thorough and professional audits of all types of oil & gas contracts and joint interest projects are performed in accordance with established COPAS and industry guidelines. Foreign Operations guarantees that their auditors have a minimum of 15 years 'audit' experience in audits of oil and gas wells drilled and/or completed, both onshore and offshore; coalbed methane wells, water flood projects; gas gathering systems and processing plants and unitizations.

Internal Audits
Foreign Operations' auditors can provide assurance to management that there is an effective system of internal control and make recommendations for changes or new controls. Internal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organization's operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes. Foreign Operations can work for company management or directly for a Board of Directors.

Operational Audits
Foreign Operations' auditors have a minimum of 15 years industry experience and have seen it all! The diverse backgrounds, training, and experience of these professionals provide a continuous influx of fresh ideas and concepts and as a team, these people complement each other and are qualified to evaluate opportunities and effectively address problems that arise in the petroleum industry. Establishing standards of operation, measuring performance against standards, examining and analyzing deviations, taking corrective actions and reappraising standards based on experience are the main focus of operational audits. The main audit concerns are compliance with policies, plans, procedures, laws, regulations and accomplishment of established objectives as well as economical and efficient use of resources all while maximizing the bottom line.

Vendor Audits
Foreign Operations' auditors have an extensive background of performing vendor audits. Do you think your vendors may not be charging you correctly, not delivering quantities ordered or not giving you the service you pay for? Do you think you are getting fictitious invoices or invoices from a fictitious vendor? Even good vendors can deliver bad results if they are not managed properly. Vendor audits ensure equipment specifications, bid packages, bid analysis, inspections, owner representation and billing practices among other things. With the current acquisitions and downsizing, vendors know that their customers may not be checking rate schedules, insurance, discounts, etc.! In addition, a vendor audit can be the best way for companies to perform compliance reviews of their conflict of interest policy.

Revenue Review and Analysis
Foreign Operations' auditors follow the oil and/or gas product from the wellhead to the receipt of the revenue check. They address the accuracy of volumes, transportation and marketing of the product, gathering and processing, tax application and percentage of ownership through the operator's and/or purchaser's accounts and records. All allocations of product are verified in instances where volumes are commingled with production from other sources. Accounting policies, procedures and treatment of revenue are evaluated as part of the audit process.

Audit Follow-Up and Rebuttal
Foreign Operations can help companies in the follow-up services for all audit exceptions taken and assistance, as necessary, in an effort to resolve audit issues on a timely basis. Services include working with the operator to resolve outstanding issues, analyzing the operator's response denying credits for audit exceptions taken to determine its validity, and providing rebuttals to the operator, in accordance with COPAS guidelines, in an effort to persuade the operator to grant credits due to the joint account. Foreign Operations will get your money because it doesn't do you any good to perform an audit if you never follow-up to collect the money.

Fraud and Investigative Forensic Consulting

Fraud Investigation
A business can easily be destroyed due to internal fraud. One individual with access to the company finances can systematically destroy your business in ways which are often difficult to detect. This fraudulent activity can go undetected for years and when finally discovered it may be too late. Foreign Operations' fraud investigators and auditors can perform many types of reviews including organizational fraud, employee theft, embezzlements, fraud by customers, inventory and supply frauds, fraud by vendors, financial statement fraud, bribery and corruption, kickbacks, bid rigging, conflict of interest, purchasing department fraud, fraud by joint interest partners, misappropriations, abuse, pilferage, ethics violations, cash larceny, skimming, fraudulent disbursements, payroll fraud, mysterious disappearances, check fraud, expense account and time sheet fraud, compliance of employee to code of conduct, employee security, surveillance, international fraud, government official fraud, counterfeit documents, handwriting analysis, employee rights, money laundering, statement analysis, mail theft, terrorism, economic espionage, price fixing and extortion and tax fraud.

Forensic Accounting
Accountants look at the numbers. Forensic accountants look behind the numbers. Suddenly there are some obvious discrepancies within your books. The numbers do not match. You appear to be making a profit, yet the books do not reflect it. What can you do? The obvious solution would be to hire an accountant. But, think again. All an accountant can do is look over the numbers and find out if they do or do not balance. If he finds out there are some inconsistencies he can inform you of this and that is where it ends. Then it is up to you to discover the reason behind the loss, the manner in which the loss occurred, and the individuals who are to blame. When you hire a forensic accountant not only do you find out all of this information, but you receive a solution to the problem. Foreign Operations knows that without the help of a specially trained forensic accountant or auditor, it would be difficult to uncover the problem and even more difficult to prevent the same. Foreign Operations' professionals can examine your books, find the discrepancies, find the reasons for these discrepancies, and even appear as an expert witness if legal action must be taken.

Internal Investigations
Have you been feeling that something's not quite right in your organization? You don't have any evidence to support your feelings, and your own internal inquiry leads nowhere? If anyone knows anything, they're just not talking. Company camaraderie keeps people from wanting to divulge information about fellow employees, so you have a hard time figuring out what's going on. What can you do? Foreign Operations' professionals can work quickly and discreetly, gathering information without attracting attention. We'll customize your internal investigation to deliver only the services you need and we'll give you the documentation you need to see the true picture.

Risk Management and Assurance

Corporate Governance
Without question, The Institute of Internal Auditors (IIA) is a leading voice in the internal auditing profession. In an April 4, 2002, statement of recommendations presented to the NYSE, the IIA said: "The recent highly publicized corporate governance failures in the United States and other countries underscore the need for fast, decisive action to require more accountability at publicly held companies. Internal auditors, the boards of directors, senior management, and external auditors are the cornerstone of the foundation on which effective corporate governance must be built." To this end, The IIA issued a set of three broad recommendations for enhanced corporate governance.

The first recommendation is that the NYSE, NASDAQ and the American Stock Exchange jointly issue one uniform set of corporate governance principals for all publicly held companies. These principles should include guidelines for the following issues:
  • Interaction among the board, management, the external auditor and the internal auditor.
  • The purpose and responsibilities of the board of directors, which would include monitoring the CEO, overseeing corporate strategy, and monitoring risks and controls.
  • The independence and expertise of directors.
  • Other issues, such as the scheduling of meetings, access to information, roles of leadership, rules for disclosure, actions of committees and roles of internal audit.

The second recommendation is that the boards of directors be required to publicly disclose an assessment of the effectiveness of internal controls within their organizations. According to The IIA, adherence to and reporting on internal controls systems would help protect shareholders and the investing public.

The third recommendation is that companies establish and maintain an independent, well resourced and competently staffed internal auditing function to provide management and the Audit Committee with ongoing assessments of the organization's risk management processes and internal controls systems.

Corporate governance in the United States is undergoing sweeping reform - in part due to widely publicized cases of corporate malfeasance that have compromised investor confidence and weakened financial markets. Most experts agree that this reform will have a significant impact on the effort to reshape corporate governance, accounting, reporting and auditing practices. Combined pressure from regulatory initiatives, outside auditors and audit committees is expected to greatly limit the use of corporate discretion with respect to financial reporting.

Sarbanes Oxley Act of 2002
President George W. Bush signed this legislation into law on July 30, 2002. In general, the Sarbanes-Oxley Act seeks to promote corporate responsibility, increase public disclosure, improve the quality and transparency of financial reporting and auditing, and strengthen penalties for securities law and other violations. The Sarbanes-Oxley Act expands corporate reporting requirements and accountabilities, expressly prohibits certain actions by public companies and significantly expands the responsibility and authority of audit committees. The Act also creates a new accounting industry oversight body - Public Company Accounting Oversight Board. This five-member board will oversee public accounting firms and related activities, such as work-paper retention, second partner review, approval of audit reports, and the testing and reporting of internal control systems.

This legislation also:
  • Increases penalties for corporate fraud convictions and enhances protection for corporate whistle blowers.
  • Requires CEO/CFO certification of all SEC periodic filings that include financial statements.
  • Requires an internal control report to be filed with the annual report, along with the CEO/CFO certification of annual and quarterly reports.

As a result of these new requirements, CEOs and CFOs will be more closely scrutinized than ever before. Even the most ethical and meticulous C-level executives will need to take additional measures to document appropriate compliance efforts, assure themselves that all relevant parties are receiving adequate and independent legal support and advice, and facilitate a corporate culture that encourages ethical behavior. Notably, Sarbanes-Oxley emphatically bans external auditors from providing non-audit services such as bookkeeping, financial information systems design, appraisal or valuation services, internal audit outsourcing services, any management function or human resources service, and investment advisor, broker, or legal services.

Other notable requirements set forth in the Sarbanes-Oxley law include:
  • A five-year rotation cycle for the external lead and reviewing audit partners.
  • Increased criminal penalties for destruction, alteration or falsification of records in conjunction with federal investigations, bankruptcy proceedings and corporate audits.

Overall, Sarbanes-Oxley changes the fundamental meaning of corporate governance by: strengthening the oversight of the SEC; making audit committees, not management, the primary employers of public accountants; strictly curtailing the activities of external auditors in order to increase independence; and enforcing management reporting and disclosures with real penalties. Foreign Operations' professionals attend seminars and forums discussing Corporate Governance and Sarbanes-Oxley to keep abreast of the rules, new laws and industry practices. In addition, Foreign Operations is not a certified public accounting firm and does not attest any financials. Foreign Operations provides unbiased, but most importantly, independent advice and solutions for your business.

Foreign Corrupt Practices Act
As a result of SEC investigations in the mid-1970's, over 400 U.S. companies admitted making questionable or illegal payments in excess of $300 million to foreign government officials, politicians, and political parties. The abuses ran the gamut from bribery of high foreign officials to secure some type of favorable action by a foreign government to so-called facilitating payments that allegedly were made to ensure that government functionaries discharged certain ministerial or clerical duties. Congress enacted the FCPA to bring a halt to the bribery of foreign officials and to restore public confidence in the integrity of the American business system.

The FCPA was intended to have and has had an enormous impact on the way American firms do business. Several firms that paid bribes to foreign officials have been the subject of criminal and civil enforcement actions, resulting in large fines and suspension and debarment from federal procurement contracting, and their employees and officers have gone to jail. To avoid such consequences, many firms have implemented detailed compliance programs intended to prevent and to detect any improper payments by employees and agents.

Following the passage of the FCPA, the Congress became concerned that American companies were operating at a disadvantage compared to foreign companies who routinely paid bribes and, in some countries, were permitted to deduct the cost of such bribes as business expenses on their taxes. Accordingly, in 1988, the Congress directed the Executive Branch to commence negotiations in the Organization of Economic Cooperation and Development (OECD) to obtain the agreement of the United States' major trading partners to enact legislation similar to the FCPA. In 1997, almost ten years later, the United States and thirty-three other countries signed the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. The United States ratified this Convention and enacted implementing legislation in 1998.

The anti-bribery provisions of the FCPA make it unlawful for a U.S. person, and certain foreign issuers of securities, to make a corrupt payment to a foreign official for the purpose of obtaining or retaining business for or with, or directing business to, any person. Since 1998, they also apply to foreign firms and persons who take any act in furtherance of such a corrupt payment while in the United States.

The FCPA also requires companies whose securities are listed in the United States to meet its accounting provisions. These accounting provisions, which were designed to operate in tandem with the anti-bribery provisions of the FCPA, require corporations covered by the provisions to make and keep books and records that accurately and fairly reflect the transactions of the corporation and to devise and maintain an adequate system of internal accounting controls. The FCPA makes it unlawful to bribe foreign government officials to obtain or retain business.

Special Services

Foreign Office-Set
Are you opening an office in a foreign country? Do you suspect you may have problems at your office halfway around the world? Is your staff 'familiar' with the culture of that country? Can you rely on local advisors to protect your interests? Foreign Operations' professionals have lived and worked overseas. They know the local laws and customs. They can open your office, review and establish ethics policies, operational and accounting policies and procedures and ensure all your offices around the world are operating in a consistent manner, with the same accounting systems, and ensure that the foreign offices know the "American Way" of doing business. Our professionals can also help your international staff understand and implement technology, methodology and best practices as necessary to gain a competitive advantage in the global market.

Due Diligence & Acquisition Support
No company can operate successfully in today's business environment without the aid of timely, accurate intelligence. If you are contemplating a new partnership, joint venture, merger, or restructuring for your corporation then you must consider your need for a due diligence investigation. Your company and your reputation could suffer if you neglect completing an investigation prior to entering into a deal which may bring with it unforeseen problems. In business dealings you can never be 100 percent certain that the relationship will work out as promised. Foreign Operations' professionals can assist during the evaluation phase or the transition phase or do a limited contract compliance audit after the final closing. Contract compliance after the effective date of the agreement normally includes, but is not limited to, purchase price adjustment review and verification, search for and collection of unaccounted for revenues, and analysis of gas balancing agreements, projects payout status, marketing and sales contracts, and regulatory agency compliance requirements. Contract compliance audits are suitably tailored for either the seller or the purchaser.

Litigation Support & Expert Witness Services
When all other avenues of resolving disputes fail and a resolution is sought in court, Foreign Operations can assist by providing experienced consulting experts or expert witness testimony. Foreign Operations can handle disputes related to oil and gas operating agreements and lease agreements involving the following:
  • Expenditures charged to joint accounts and billed to the parties;
  • Pricing of oil and gas products produced and marketed;
  • Production of oil and/or gas in paying quantities;
  • Redetermination of well costs;
  • Damages for lost production;
  • Pricing of tubulars and other controllable material;
  • First level supervision in the field;
  • Cash settlements upon property payouts; and,
  • Payments received by royalty owners.
Consulting and litigation support is provided to oil and gas companies, drilling funds and other investors in oil and gas, partnerships, mineral interest owners held in trusts and royalty owners in oil and gas properties.

Arbitration Services and Mediation
The arbitration and mediation processes are quickly becoming recognized as viable means of settling disputes between operators and non-operators in a timely, confidential fashion and without incurring substantial legal fees. Often arbitration and mediation are employed to resolve disputes between investors and operators, especially in settlement of unresolved audit exceptions, without the costly delays involved in litigation.

Code of Ethics
The enactment in 1991 of the Federal Organizational Sentencing Guidelines (Guidelines) renewed interest in formal, comprehensive compliance programs intended to prevent, detect and respond to improper business conduct. The Guidelines provide corporate America with ample reason for its interest: business organizations that exercise due diligence in the design and implementation of "effective" compliance programs and subsequently run afoul of the law will find their potential fines substantially reduced, will avoid otherwise mandatory probation with invasive conditions, and perhaps most important, may avoid prosecution altogether. Now that corporate directors and officers may face personal liability for failing to ensure that their organizations have established adequate compliance systems and a growing body of governmental policy statements-in areas from antitrust to the environment to health care-offer organizations significant incentives to ensure effective corporate compliance, Foreign Operations can help your company in such areas as compliance management and oversight, training and communication, auditing and monitoring, and violation response systems.

Controls Review and Consulting
Foreign Operations' auditors document existing controls at each significant control point, evaluate the adequacy of the controls to ensure achievement of the objective, and then test the controls to verify they are working. They focus on control risks, insights, and potential control enhancements.
  • Internal control is a process. It is a means to an end, not an end in itself.
  • Internal control is affected by people. It's not merely policy manuals and forms, but people at every level of an organization.
  • Internal control can be expected to provide only reasonable assurance, not absolute assurance, to an entity's management and board.
  • Internal control is geared to the achievement of objectives in one or more separate but overlapping categories.
  • Most internal controls can be classified as preventive or detective. Preventive controls are designed to discourage errors or irregularities.

The auditor's evaluation includes an examination of the following internal control elements:

Personnel - should be competent and trustworthy, with clearly established lines of authority and responsibility documented in written job descriptions and procedures manuals.
  • Organizational charts provide a visual presentation of lines of authority.
  • Periodic updates of job descriptions ensure that employees are aware of the duties they are expected to perform.

Authorization Procedures - should include a thorough review of supporting information to verify the propriety and validity of transactions. Approval authority should be commensurate with the nature and significance of the transactions and in compliance with company policy.
Segregation of Duties - should reduce the likelihood of errors and irregularities. An individual should not have responsibility for more than one of the three transaction components: authorization, custody, and record keeping.
Physical Restrictions - are the most important type of protective measure for safeguarding assets, processes, and data.
Documentation and Record Retention - should provide reasonable assurance that assets are controlled and transactions are correctly recorded.
Monitoring Operations - is essential to verify that controls are operating properly. Reconciliation, confirmations, and exception reports can provide this type of information.

Project Management
Foreign Operations can help international clients understand and implement technology, methodology and best practices as necessary to gain a competitive advantage in the global market.

Business Valuations
Most people are well informed on the value of their home, car, boat, and other personal assets but few people know the value of their business. Whether there is a new and pending partnership, closure, sale of business, etc., it is essential to have sound professionals conduct in-depth research and analysis regarding the economic outlook, competition, and financial status of a business or individual. There does not have to be "best guess" or "rule of thumb" estimates. Foreign Operations will provide you with a fair market value of your business through the careful examination of financial and operational data, legal documents, and other relevant information. Our experts have a unique combination of quality and experience and can service your particular valuation needs in the most professional and credible manner.

Training

Are you a non-US company needing customized training in oil & gas accounting, joint venture audits, revenue audits, etc.? Don't you want actual practitioners to teach the solutions and best practices to the same challenges your staff encounters?

Foreign Operations' Consultants have educated international senior management from foreign governments and companies on conducting Joint Venture Audits, Oil & Gas Accounting Procedures, International Business and the American Way of Doing Business.


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