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Audit Memorandum of Triton Energy Ltd

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An audit plan is prepared with the purpose of being used effectively by the audit team also to contribute towards the overall effectiveness of the audit being held. This memorandum is to be completed as the final part of the audit process of Triton Energy Ltd.

The audit memorandum is divided into 3 parts:

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  • Introduction of the Company and Brief description
  • Identification of known risks and problems within the company(Issues within the firm)
  • Conclusions and recommendations

Introduction

Triton Energy Ltd., an oil and gas exploration company is the successor of Triton Energy Corporation, a company founded by L.R. Wiley in 1962. Soon afterwards, Bill Lee joined the company and was promoted to the position of CEO in 1966. The business under Lee focused on exploring oil production efforts to other countries like Colombia, Argentina, Australia,Canada, France,New Zealand, Malaysia ,Thailand and Indonesia.

In effect, the business was pursuing a rough and tumble strategy by seeking to find oil exploration venues ignored by other competitive firms.

However, it can be duly noted that due to the company’s relatively small size in relation to that of major oil firms,the business resorted to unconventional strategies to achieve its financial objectives.

The company established close relationships with the agencies and officials it worked with.

Allegations of bribery soon poped up with Triton being accused of paying bribes to obtain favourable treatment

Allegations on violating the Foreign Corrupt Practices Act of 1977.

The Risks identified within the company

  1. Triton Indonesia, a subsidiary of the firm owed around more than $600,000 in additional taxes. Of this figure, more than half are taxes imposed by Pertamina auditors while the remainder falls to those imposed by BPKP auditors.
  2. The company is found to have hired an external mediator , Roland Soufi in order to cover up the alleged tax assessment payments .
  3. 2 Key members of the pertamina audit team were paid around $160,000 to cover up tax assessments of around $385,000. An auditor from BPKP was also paid around $20,000 to reduce the company tax assessment from $233,000 to $155,000.

The above problems can be understood as clear violation to various accounting standards while also simultaneously violating the FCPA act of 1977. For example it can be understood that the above risk violate SAS 99.

SAS 99 is an auditing statement that describes the considerations of fraud requiring adequate assessment of material misstatement.

Overall, it can be understood that due to poor internal control systems and falsification of data and reports to cover up fraud, the financial statements are materially misstated and do not provide clear view of business activities .

Conclusions and Recommendations

The implications of the company due to the above scandal resulted in the sanctioning and resignation of its Board of Directors. Moreover, in 2001, the company no longer could remain to be independent as it was purchased by Amerada Hess. Some future recommendations include:

Increased internal controls:

  • Measures to detect bribes and stop them from happening
  • Better management and training of staff to ensure that records are maintained more accurately and completely

    Implementation of company policies against bribery and also improve conditions of disclosure by auditors so that they can act with independence and smoothly communicate any issues discovered

Overall, by improving the control policies of the firm it is believed that the risk of fraud occurrance can be reduced.

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