ENGAGEMENT
Audit Rights
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Non-operating partners should plan audit engagements well in advance and in full compliance with the audit rights set out in the applicable Accounting Procedures of the respective JOAs, PSCs or EPSAs.
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In joint ventures with multiple non-operating partners, alignment among the parties regarding the audit period, scope, and coordination approach is often required to ensure procedural compliance, avoid duplication, and preserve rights consistently across the partnership structure.
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Most contracts require formal prior notification to the Operator, typically at least 60 days before commencement of audit fieldwork. The notification shall clearly define the audit period, scope, and any specific focus areas to ensure contractual compliance and timely access to documentation and personnel.
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Audit rights generally permit review of expenditures covering the two most recent financial years. Where a non-operating partner intends to audit three financial years, early coordination and explicit agreement with the Operator are required to preserve rights for the earliest year. Without timely action, audit rights may lapse.
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Audit rights may, where contractually supported, extend to related agreements that materially affect joint account charges (e.g., transportation, intercompany services, drilling or infrastructure contracts).
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When scheduling audits, it should be recognized that access to source documentation can vary considerably depending on the country’s upstream market maturity, the Operator’s organizational structure, and the internal systems environment. In some cases, direct access to accounting systems (e.g., SAP or similar ERP platforms) is granted via on-site network access or secure remote desktop access. In many instances, however, audits are performed based on pre-selected samples extracted from the general ledger and provided via shared drives or data rooms – a preparation process that may require several weeks or even months before documentation is fully made available by the Operator.
Recommended Audit Planning Approach
We recommend that non-operating partners establish a formal annual audit plan in the year preceding the intended audit(s). A forward-looking planning approach reduces the risk of lapsed audit rights, supports efficient resource allocation, and enables structured coordination with Operators and co-venturers. This structured planning process should typically include:
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Identification of upcoming audit windows based on contractual time limitations and notice requirements
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Confirmation of the financial years and contractual regimes to be reviewed
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Reservation or preservation of audit rights where extended or multi-year coverage is intended
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Preliminary risk assessment based on expenditure levels, prior audit findings, operational activity, and accounting complexity
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Definition of key focus areas (e.g., drilling campaigns, overhead allocations, shared services, rig intake, major EPC contracts)
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Internal budget approval and preliminary resource allocation
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Early engagement of external audit specialists, where required.
Advance planning is particularly important where independent external resources are involved or where audits span multiple assets, jurisdictions, or contractual regimes. JV Audit Services GmbH operates under a rolling multi-year resource plan to ensure continuity and consistent senior-level expertise; short-notice requests are therefore subject to capacity and prior commitments.
Sufficient lead time is required for team allocation, internal scheduling, detailed review of governing agreements, structured scope definition, and preparatory work such as general ledger data analytics, billing and cash call reconciliations, and sample selection where applicable. This ensures that fieldwork is risk-oriented, analytically prepared, and strategically aligned. Early alignment on scope and objectives safeguards audit rights, avoids scheduling conflicts, and supports an efficient, value-driven engagement.
DETERMINATION OF AUDIT RESOURCES
The level and composition of audit resources are determined on a risk-oriented basis.
Team size, required expertise, and fieldwork duration depend on several key factors, including:
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Overall expenditure volume relative to the non-operating partner’s working interest
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Size, complexity, and maturity of the Operator’s full asset portfolio
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Complexity of accounting environments, including multinational and multi-venture sharedservice allocations
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Operational phase (exploration, development, production, abandonment) and activity intensity (e.g., drilling campaigns, deepwater or CCS operations) Complexity of contractual frameworks (JOA / PSC / EPSA) and additional partner agreements
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Operator transparency and cooperation throughout budgeting, AFE approvals, billing, and cash call processes and support during previous audit to clarify IRs
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Geographic spread, system access conditions, and documentation quality
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Previous audit results and required follow-up work
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Local HSE requirements, travel security conditions, and remoteness of audit locations.
Beyond volume and duration, resource determination also considers the required technical skill mix, including contractual interpretation capability, SAP/ERP data analytics expertise, operational cost understanding (e.g., drilling, marine, logistics), and dispute support readiness where escalation risk exists. Where complex allocation mechanisms, affiliate transactions, or multiventure cost sharing structures are present, additional analytical preparation may be required.
Resource planning differentiates between preparation phase, fieldwork execution, follow-up phase, and reporting phase.
AUDIT SIZE & DURATION
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Small-scale audits – for example single-asset reviews with comparatively low expenditure volumes or clearly defined thematic focus areas – are generally executed by one to two auditors within a fieldwork period of approximately one to two weeks. The scope is typically limited to selected risk clusters, defined cost categories, or specific contractual and allocation questions. Preparation emphasizes structured ledger analytics, risk-based sampling, and targeted testing of transactions and allocation logic. The objective is to deliver a precise, proportionate, and technically robust assessment while ensuring efficient deployment of experienced audit resources.
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Mid-sized audits generally involve higher expenditure volumes, multi-year review periods, several assets and equity groups or more complex allocation and shared-service structures. Such engagements typically require a core team of two to three auditors over a fieldwork period of approximately three weeks. In addition to transaction testing, these audits often include structured review of overhead allocations, intercompany charges, rig or marine cost splits. Preparation phases are more extensive and include deeper ledger analytics, allocation modelling, and contract interpretation to ensure comprehensive coverage of material risk areas.
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Large or complex audits – for example in multi-venture environments, high-value drilling or development campaigns, deepwater operations, or extensive shared-service and intercompany frameworks – may require a larger team and extended preparation and fieldwork phases. Such audits typically involve longer advanced data analytics, detailed reconstruction of operational activities, allocation modelling across ventures, and structured coordination with multiple stakeholders. Preparation and follow-up phases are correspondingly longer to ensure robust documentation, defensible findings, and readiness for potential escalation procedures.
Across all engagement sizes, adequate preparation time for data analysis, accounting reconciliations, contractual interpretation, and operational understanding is essential before fieldwork commences. The exact scope of follow-up procedures, escalation steps, and reporting depth ultimately depends on the nature, complexity, and materiality of the audit findings
JV AUDIT SERVICES GMBH FEE STRUCTURE
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JV Audit Services GmbH operates under a transparent, time-based remuneration model designed to ensure clarity, predictability, and alignment with the actual effort required for each engagement.
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All services are billed on the basis of agreed daily rates. All assigned team members are senior auditors with extensive experience in international joint venture audits. No junior or trainee profiles are deployed unless explicitly agreed. Fees are calculated strictly on the basis of actual days worked, without flat fees or bundled pricing structures
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Prior to commencement, an engagement budget is proposed for planning purposes and purchase order. This budget is structured by audit phase - typically including planning, preparation and data analytics, fieldwork, follow-up and reporting. The proposed budget reflects the anticipated scope, complexity, and risk profile of the engagement. However, invoicing is based exclusively on actual time incurred.
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We operate with strict budget discipline. Time incurred is continuously monitored against the agreed budget and, where applicable, against approved purchase order volumes. Any potential deviation is identified at an early stage and communicated transparently. Only in exceptional cases, for example where significant follow-up topics, material new findings arise, we consult the Client to discuss a possible scope extension and corresponding budget adjustment. No expansion of work is undertaken without prior alignment and approval.
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Time writing is maintained in a structured and auditable format. Each time entry includes a description of the activity performed to ensure transparency and traceability. Time records can be made available to the Client upon request anytime and will be submitted at the end of the engagement together with our invoice.
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No contingent fee arrangements, recovery-based compensation models, or success fees are applied. Remuneration is independent of audit findings or recovery outcomes, ensuring objectivity and professional independence at all times.