Preserving Value, Fairness & Assurance through Joint Venture & Contract Audits

Effective Joint Venture Accounting and Contract Compliance in an E&P Operator are vital for all parties involved and those who share in a venture. They are the first line of defence processes that provide assurance and comfort to the owners…

Blog15th Sep 2020

By Graeme Robertson

Effective Joint Venture Accounting and Contract Compliance in an E&P Operator are vital for all parties involved and those who share in a venture. They are the first line of defence processes that provide assurance and comfort to the owners and partners that outgoing payments are valid and reflected accurately.

However, what is the safety net or fall back if such processes fail or are not as robust and secure as they should be?

The provision of an audit clause within Joint Operating Agreements (JOAs) and 3rd party Contracts often allows for this. This affords the opportunity for skilled, industry knowledgeable professionals to review, test and confirm cost that has been charged to the owners and partners of an asset.

The importance of Joint Venture Auditing and Contract Auditing can be demonstrated;

JV Auditing is working in conjunction with partners to review Operators’ implementation of the various governing JV agreements by verifying actual JV billings against those agreements and/or against generally accepted industry practice. Such audits are at the request and support of the non-Operated team and are prescribed within the audit rights of JOAs.

Contract Auditing reviews the suppliers of services to ensure contractual obligations, terms and conditions are being consistently met. Reviews of both financial and non-financial aspects e.g. performance, relationship management, subcontractor control, competency are all usually within scope in these types of review. These audits are at the request of the business e.g. Commercial, Logistics, Projects, Wells or Hydrocarbon Accounting teams.

The outputs from such reviews demonstrates the importance of a consistently applied process in performing JV and contract audits for our clients. These can be measured by;


  • Demonstrating value by returns of cash;
  • Ability to draw thematic risks/issues across commercial agreements;
  • Joining up HSE & Quality audits with the Assurance audit scope and fieldwork, thus reducing footfall to suppliers;
  • Providing a consistent and accurate reporting format in line with industry guidelines and standards;
  • Adding value and identifying future savings;
  • Highlighting a 360° review for Operators and Suppliers, with the opportunity to provide feedback on business performance and highlight any procedural or systems issues.


  • Providing a greater level of assurance across the business with the potential to re-charge audit activities to the relevant part of the business;
  • Working closely with Supply Chain Management teams thus ensuring the client departments are aligned;
  • Recommending improvements to the client’s business approach i.e. introducing a contract compliance team (cannot rely solely on future audit as a line of defence) or undertaking a vendor risk analysis;
  • Inputting into tendering or contract negotiations i.e. support by providing an independent and pragmatic review;
  • Giving assurance on the performance of suppliers and operating partners to mitigate risk mismanagement;
  • Rectifying ambiguities and inconsistencies in commercial agreements that are identified, therefore leaving the business less exposed in the event of contractual dispute;
  • Maintaining adherence to all party agreements and correct procedures during times of industry downturn and cost reduction, at times when there can be a risk of corners being cut.

Beyond the specialist discipline of Joint Venture and Contract Audit, the capabilities of our Energy Team are diverse. This was demonstrated recently in the delivery of a project for a leading UKCS Operator to review, reevaluate and rank all their 3rd party vendor contracts.

This was a Supply Chain Management led project that required to be delivered entirely remotely due to COVID-19 restrictions. This proved to all involved that significant scopes of work can be delivered with flexibility, imagination and dedicated skill whilst still delivering awesome service on time and on budget. Not only did the team deliver a scope of work within an agreed seven-week time-frame, the output will lead to further work supporting the client in undertaking future contract audit scopes. In a challenging market, this was a real good news story for the team and of course our client.

To find out more about AAB’s Joint Venture and Contract Audit services, click here and please contact Graeme Robertson for more information.

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