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Chesapeake Energy Auditing Case Study

479 Words2 Pages

The auditing team will need to have a diverse set of skills and experience in order to properly audit Chesapeake Energy. First, the audit team must have experience within the gas and oil industry in addition to understanding the various complications of oil and gas production. Relevant skills and experience include knowledge about the industry, and include work experience related to oil and gas companies. This is critical because many oil and gas companies operate internally and follow IFRS. Some only follow GAAP such as Chesapeake Energy. Also, accounting methods will differ in various ways for oil and gas companies and auditors should know how the difference can affect financial statements. For example, oil and gas companies have the option of capitalizing all costs related to drilling as mentioned earlier. Understanding the different outcomes in the financial statement that each method can bring is crucial since it has the ability to overstate or understate assets. …show more content…

This valuation expert or team of experts should have an extensive experience in valuing assets related to gas and oil reserves. With this experience, as part of the audit team, this individual must be independent of Chesapeake Energy. While Chesapeake Energy may have assets valued prior, there should be questions raised in regards to who performed the valuation. If the valuation was done internally, there would be motivation and opportunity to alter such valuation. The valuation expert should test work done prior to the audit. If Chesapeake Energy had valuations taken earlier prior to the audit by independent experts, more reliance could be placed on such figures, and less substantive testing would be done. The valuation experts or reserve estimators should be able to test impairments, and other tangible/intangibles relating to the nature of gas and oil

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