Royal Dutch Shell Group .com Calls grow for external auditing of oil reserves ( Posted 10 Nov 04

Plus related article: Shell fiasco haunts KPMG


Leading investors in the embattled petroleum group Royal Dutch/Shell are urging management to 'lead the industry forward' by producing an annual reserves statement certified by external auditors.

Link: Shell to become one giant company


Calpers, the Californian state pension fund, and Knight Vinke Asset Management, also partly owned by Calpers, has called on Shell to introduce 'transparent and meaningful' reporting of its reserves, The Financial Times reported.


Sean Harrigan, Calpers president, said: 'Shell should lead the industry forward by raising the bar on how it audits and reports its assets.'


The move would mark a turning point for the industry, in which there are currently no requirements for oil companies to have their oil reserves audited externally.


The US has recently seen growing support for the large accounting firms to sign off reserves' statements after Shell overestimated its oil reserves, causing investor outrage and the eventual removal of senior management at the beginning of this year.


Related AdvertisingAge Article: Shell fiasco haunts KPMG


By David Rae [23-09-2004]


KPMG has been dragged back into the Shell oil reserves controversy after Sir Philip Watts, the company's former chairman, instructed his lawyers to challenge the Financial Services Authority's final notice against the oil giant.


In an application to the Financial Services and Markets Tribunal, Watt's lawyers Herbert Smith claimed that Sir Philip 'relied on the reviews given by Shell's experts in oil and gas reserves estimation, and Shell's external auditors, to ensure the accuracy of reserves information'.


While reserves do not appear on the financial statements of oil companies, and therefore remain unaudited, Herbert Smith said that statement of auditing standard 52 means auditors must 'determine that the methods for estimating proved oil and gas reserves comply with generally accepted accounting principles'.


Sir Philip's lawyers also raised concerns over why KPMG had supported the group reserves auditor's 'competence and independence', despite the FSA singling it out as 'ineffective'. Sir Philip is understood to be looking for amendments to be made to the FSA's Final Notice. KPMG declined to comment.


The FSA this week defended its procedures when looking at the Shell issue.


A spokesman said: 'We are quite conscious of, and fully understand, our responsibilities to the rights of third parties. We are confident that any tribunal will find we respected Sir Philip Watt's rights.'

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