AUDITING UNCLAIMED FINANCIAL ASSETS

OIL & GAS INDUSTRY

Presentation by:

CPA Stephen ObockNovember 2017

Uphold public interest

Agenda

Introduction

Audit approach

Q&A

Introduction

Regulatory framework – UFAA Presentation

Auditing framework - compliance

Overview of O&G sector

Upstream

Comprises exploration and

production (E&P) of petroleum

crude oil and natural gas.

Midstream

Involves storage and transportation from exploratory wells to storage

terminals.

Downstream

Involves refining, processing and marketing, after the production

phase, through to the point of sale.

Oil Field Services

Includes companies involved in the operation, manufacture and

provision of services across the value chain – at various levels of

complexity.

Applicable unclaimed assets in O&G

Section of the UFA Act,

2011

Asset PeriodTo Qualify as

Unclaimed Asset

Section 4 Travellers cheques / money holders 2 Years

Section 5 Cheques, draft or similar instruments 2 Years

Section 9 Deposit for utility services i.e. Electricity

deposits, water deposits,

Telecommunication deposits

2 Years

Section 10 Determination or Order by Court of refund

by holder i.e. where a determination / award

is made by the court and the beneficiary

cannot be traced.

2 Years

Section 11 Ownership interest i.e. Shares, dividends, unit trusts

3 Years

Section 12 Assets from dissolved business entity 2 Years

Section 15 Unpaid wages i.e unpaid allowances , unpaid salaries

1 Year

Section 16 Assets held in safe deposit box 2 Years

Potential unclaimed assets in O&G

Dividends

Royalties

Salaries and employee benefits

Mergers and acquisitions (acquired assets)

Audit Approach

General approach

What informs the audit approach:

✓ Client understanding of the Act and related

regulations

✓ Perform risk management procedures

✓ Processes in place by the client to ensure the

following:

i. Identify unclaimed assets

ii. Account for unclaimed assets

iii. Report unclaimed assets to the authority

Audit Approach

Audit approach in general would involve:

✓ Performance of inquiries to identify controls aimed at

ensuring compliance

✓ Testing of the design and/or operating effectiveness

of the identified controls

✓ Performing substantive test work to achieve the

following:

a) Accuracy of the reported unclaimed assets

b) Completeness of unclaimed assets

Specific procedures-substantive

Liability Procedure

Trade &

Other

payables

✓ Obtain breakdown and inquire if creditor is operating/exists

✓ Obtain aging report and identify dormant accounts.

✓ Identify un-utilised aged deposits by customers

✓ Identify old amounts for retired, dead or employees who left.

✓ Inspect un-identified receipts that could be under receivables

Unclaimed

dividends

✓ Obtain movement schedule for the dividend account

✓ Obtain evidence for any amounts submitted to UFAA

✓ Obtain evidence for dividend declared in the year

✓ Obtain evidence for dividends paid in the year

✓ Perform a roll forward to ascertain the closing unclaimed

dividend amounts (opening + declared – paid)

✓ Inspect dividend accounts under cash and bank balances

Specific procedures-substantive

Liability Procedure

Due to related

parties

✓ Understand nature of balances and terms of payment

✓ Establish if related entities exist

✓ Obtain aging report to identify dormant accounts

✓ Perform inquiry on why dormant accounts have not been

submitted to UFAA

Short term

borrowings

✓ Identify whether the lender is in operation

✓ Understand the terms of payment/repayment

✓ Obtain loan movement schedule and reasons for dormant

accounts.

✓ Perform inquiry on why dormant accounts have not been

submitted to UFAA

Case study O&G

Case study O&G- Total Limited

Liability2016

KShs 000’s

2015

KShs 000’s

Potential

UFA?

Trade & Other payables- LT 1,426,434 1,244,627 Yes

Unclaimed dividends - 6,748 Yes

Tax payable 243,992 - No

Trade & other payables - ST 7,803,954 8,245,608 Yes

Due to holding company 3,545,644 2,979,970 Yes

Due to related companies 11,826 79,326 Yes

Short term borrowings 3,804,232 4,069,010 Yes

Breakdown of trade & other payables – Note 23

Liability2016

KShs 000’s

2015

KShs 000’s

Trade payables 7,398,964 7,901,825

Other payables and accruals 1,831,424 1,588,410

Total payables 9,230,388 9,490,235

Unclaimed dividend account Note 11

2016

KShs 000’s

2015

KShs 000’s

At 1 January 6,748 6,748

Dividend declared in the year 484,748 440,680

Dividends paid in the year (484,748) (440,680)

Transferred to UFAA 6,748 -

Balance at 31 December - 6,748

Breakdown- Trade payables (simulated)

30 days 60 days 90 days 120 days 360 days over 2 years Totals

KShs'000 KShs'000 KShs'000 KShs'000 KShs'000 KShs'000 KShs'000

ABC Plc 990,050 60,150 - - - - 1,050,200

XYZ ltd - - - - 100,200 879,800 980,000

Others 4,295,011 451,200 510,001 3,050 - 109,502 5,368,764

Totals 5,285,061 511,350 510,001 3,050 100,200 989,302 7,398,964

Other payables breakdowns (simulated)

Other payables & accruals 31-Dec-16UFA?

KShs ‘000

Professional fees accrued 699,000

Others payables 50,300

Royalties Accrued 350,700

VAT payable 180,870

Employee benefits payable 550,554

1,831,424

Other payables breakdowns (simulated)

Accrued salaries and employee benefits 31-Dec-16

Employee

# DateDescription KShs ‘000 UFA?

201 06-Jan-16

Sabbatical leave - Dec 2015

overtime pay 43,500

321 01-Jan-15

Final dues withheld due to non-

clearance 331,254

851 06-Apr-14

Mileage claim processed after

exit 65,800

905

25-Nov-

16

Bonus withheld for disciplinary

case 110,000

550,554

Interactive Session