THE EFFECT OF THE PROCESS OF VERIFICATION AND VALUATION OF ASSETS IN AN OIL AND GAS COMPANY

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

The fact that there was an entry has been found the purchase of an asset and which ‘entry has been to be correctly recorded is not proof that the assets are in possession of the concern at the date of the balance sheet. It is possible that after the asset has been acquired and the necessary entries made in the books of accounts, that asset might have been disposed off pledged or mortgage but no entry has been made regarding these facts in hence, the objects of verification of assets is the satisfactory by the auditor as to its existence proper valuation, correct ownership, proper valuation, discourse, etc on the balance sheet. Verification is the method used to prove the authority of the recorded amount of assets. It has to do with balance standing in the books of a company. Valuation, on the other hand, is the method used to ascertain the values of assets at the end of the accounting period. In the early of auditing, the prime qualification for the position of an auditor was reputation. A man known for his integrity, objectivity, and independence of the mined would be sought for this honored position, thereby, making matters of technical ability entirely. In the early of auditing, the prime qualification for the position of an auditor was reputation. A man known for his integrity, objectivity, and independence of the mined would be sought for this honored position, thereby, making matters of technical ability entirely secondary. Consequently, his functions were never confused with that of an accountant. Gradually, annual reports and accounts of companies were often prepared by directors for the consideration of shareholders, many groups of the person i.e. stockholder potential investors, trade union Bankers, people who were interested in amalgamation, mergers, and take-over. All these people must be sure that the financial statements can be relied upon. The accuracy of the financial statement and that of the estimates of the trading results depends almost entirely upon assets. The question here now is that, can the stakeholder and shareholder believe in the reports of directors without verification and valuation of the companies’ assets These questions led to the appointment of an independents experts, called the “auditor”, who will investigate and report on the financial state of the organization. He will carry out verification of all the assets considering the cost, authorization, valuation, existence, etc. This verification is the lapses in the company’s books of accounts and to ensure conformity with the accounting policies all relevant statements of accounting standards as well as the international accounting statements.

1.2 STATEMENT OF THE PROBLEM

In view of the inherent problems experienced in the valuation of assets that are caused, by various factors such as. Wear and tear even due to instability in change rate, one of the specified researches against the law of the company.

Secondly, is to address the problem of adequately of valuation method to use and to also address the problem adequacy of the company’s terms of verifying and evaluating of the company’s assets, and to confirm the accuracy of the genuineness of the balance shown in the books.

Finally, an attempt to find answers to the problem question that will help to proffer a tasting solution on the verification and valuation for management to use in arresting the situation but it is paramount for management to determine the best method to use at a particular period.

The view of these research findings is to address these problems.

1.3 RESEARCH HYPOTHESIS

For the purpose of this study, the following hypothesis has been formulated:

Ho: That the method used in the valuation of assets has no positive effect on the company’s’ assets.

Hi: That the method used in the valuation method of assets has a positive effect on the company’s’ assets

 

1.4 OBJECTIVE OF THE STUDY

The general objective of this research finding is to look into the operational activities of Oando Nigeria plc in other to ascertain the ways /method s used for the valuation of assets in the organization.

Emphasis will be laid on the processes and methods available to the company.

Other objectives are:

i.        To examine the effectiveness of the method used by the company and also evaluate their sources of information.

ii.        To examine the system of operation used in Oando Nigeria plc and to determine the effectiveness of each available method iii.        To examine what assets are attainable in the portfolio method used for assets valuation, their average.

1.5 SIGNIFICANCE OF THE STUDY

It is expected that this study will add to the existing literature and knowledge of various individuals in the field of accounting, who are interested in the topic as well as others who may need such information.

This research work is expected to serve as reference material to management.

1.6 SOURCE OF THE STUDY

 

This research work focuses on the process of assets verification and valuation is an oil and Gas company. The research shall be limited to the assets alone or the asset aspect of the organization, thereby, excluding the liability aspect even though they go hand in hand.

This study is carried out using Oando Nigeria Plc. As a case study.

1.7 HISTORICAL BACKGROUND OF OANDO NIG PLC

Oando Nig. Plc commenced operations in 1956 as a petroleum marketing company in Nigeria, under the name Esso West African incorporated company. It was a subsidiary of Exxon Corporation of the united state of American (USA). On the 25th of August, 1969, the company was incorporated under Nigeria law as Esso standard Nigeria limited. In 1976, the Nigeria government bought Exxon’s interest in the company and it was re-branded, uni petrol Nigeria limited company (UNIPETROL).

The company became a public limited company in 1991 when the federal government of Nigeria divested 60% of its shareholding to the general public. Its shares were listed on the Nigeria stock exchange in February 1992.

Oceanic and oil Investment limited (DOll) acquired a 30% stake in Unipetrol from the federal government of Nigeria in 2000 and thus, become the care investors. The investment in uni petrol by OOIL was with the supports of its technical partners, companies, Espaniola De petioles (CEPSA) which is the teaching oil company in Europe. CEPSA is a fully’ integrated production of petrochemicals, natural gas, trading, refining, distribution, and marketing.

In August 2002 Unipetrol acquired a 600/0 stake in Agip Nigeria Plc (AGIP) wining on the international Bid team conducted by Agip petrol. Unipetrol’s management team subsequently led the merger and integration of Agip with Unipetrol and the combined entity was re-branded, Oando Plc in December 2003. In a filtrate and subsidiary companies into an integrated group.

Dando’s exemplary performance I adherence to the post listing equipment and other indices of corporate government was commenced by the Nigeria stock exchange with the highly coveted award of the “quoted company of the year” for 2003 and 2004 financial years. The company was also awarded the best in the petroleum downstream sector in 2001, 2003 and 2004 respectively.

Oando was registered as an external company in South Africa on Tuesday, 1st November 2005, and on 25th November 2005, listed its shares on the Johannesburg stock exchange (JSE) Limited as a secondary listing.

On November 2nd, 2005, the company also received the endorsement of the international standard for the organization (ISO) fourth world-class products and services s delivery, with the award of the prestigious NIS, 150< 9001; 2000 certification.

GROUP STRUCTURES ORGANIZATIONAL SET-UP OF OANDO PLC)

 

Oando has consolidated its subsidiaries into an integrated energy group as outlined in the diagram below:

Oando is a true Nigeria corporation, created by the merger of uni petrol and Agip Nigeria’s downstream assets but which has since evolved from a purely downstream marketing company to become integrated energy conglomerate .with operations across West African and business interest globally.

The Agios’ activities new spend petroleum product marketing, supply and trading crude oil and refined petroleum independents power solution, exploration and production of crude oil and provision of support services to upstream exploration companies. Turnover for the group rose from N183 billion (approximately N200 billion) in 2005 to N209 billion (approximately N210 billion) in the year 2006.

The company has a primary rising on the Nigeria stock exchange (NSE) with a market capitalization of over $350 million US dollar as of February 2007. In November 2008, the company conducted its secondary listing on the Johannesburg Stock Exchange in South Africa -Africa’s first inward chill listing on the exchange.

1.8 DEFINITION OF TERMS

 

The following terms are defined as they are relevant in this project:

i.        ASSET: These constitutes property or resources which a business own:

ii.        a form with $1.3biIHon in assets. Examples are cash, stock, furniture, land, etc iii.        Cost: This is the original price at which the asset was acquired.

iv.        Authorization: i.e. that there was proper authority to acquire the asset.

v.        Verification: A process of checking or proving the authentically of the recorded amount of assets.

vi.        Valuation: this is a method that is used to ascertain the value of an asset at the end of an accounting period.

vii.        Existence: i.e. that the assets activity actually exists at the period under consideration.

viii.        Beneficial Ownership: That is, whether the company actually owns the assets, the company may have acquired them on a mortgage or hire purchase.

ix.        Presentation: Whether there is a proper and accurate presentation of the assets figure in the books. Thus presentation must be clear and ambiguous, appropriate to the nature of the business in accordance with relevant accounting standards and consistent with previous years.

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