Abu Dhabi National Oil Company’s Accounting and Audit

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Introduction

The purpose of this proposal is to present the problem statement and objectives for secondary research that will be conducted to examine accounting and auditing strategies adopted by Abu Dhabi National Oil Company (ADNOC). Two questions take center stage. The first one pertains to accounting and auditing standards that the ADNOC Group of Companies currently has. The second question is whether the group’s inner control policy and approaches to account reports and financial reviews need to be improved in order to be able to compete with other companies. The proposal also provides the details of the industry selected for the research, as well as details related to ADNOC. The SWOT analysis will be performed to propose a background for understanding business and accounting issues in ADNOC. The relevant course learning outcomes, methodology, and plan of action are also discussed in the proposal.

Details of Chosen Industry

The gas and oil industry is the leading sector in the United Arab Emirates (UAE). In 2014, the revenues from this industry comprised 24% of the country’s gross domestic product (GDP), up from 18% in 2004; in terms of total general government revenue, oil and gas accounted for 65% in 2014 (International Monetary Fund, 2015, p. 3-4). The UAE produces approximately 3.7 billion barrels of oil per day (International Monetary Fund, 2015, p. 8). Oil exports are especially important: in 2011, they accounted for 77% of the UAE’s state budget (Global Data, 2016). Within the country, the oil and gas industry, including its petrochemical sector, is dominated by state-owned companies (Global Data, 2016). Therefore, much attention should be paid to researching specific accounting and auditing practices in this industry, in order to focus on principles of conducting business and preparing financial statements at the state level.

Details of Chosen Organization

ADNOC is a state-owned company that operates in the oil and gas industry of the UAE. The company was founded in 1971, and today, it unites more than 20 subsidiaries, known as the ADNOC Group of Companies, that operate in the oil and petrochemical sectors of the UAE (ADNOC, 2016). The ADNOC Group of Companies includes such firms as Abu Dhabi Company for Onshore Oil Operations (ADCO), Zakum Development Company (ZADCO), and Abu Dhabi Marine Operating Company (ADMA-OPCO), among others (World Market Intelligence, 2014). These companies monitor upstream, midstream, and downstream operations. The focus is on the exploration and production of oil and gas products, as well as on the production of petroleum products. Currently, ADNOC “manages and oversees oil production of more than 3.15 million barrels per day (bpd), ranking it the 12th largest oil and gas producer in the world” (ADNOC, 2016, para. 4). The group manages 95% of the UAE’s proven oil reserves and 92% of the country’s gas reserves (ADNOC, 2016, para 3). The overall number of employees working in subsidiaries is more than 20,000 people (Global Data, 2014). ADNOC has been selected for the study because it is the largest national oil and gas company in Abu Dhabi.

SWOT Analysis

In order to identify problems in practices and strategies followed by ADNOC in terms of accounting and auditing, it is necessary to perform a SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis:

Strengths

Subsidiaries of the ADNOC Group of Companies have internal auditor teams that include experienced specialists.
Auditors report to the Supreme Petroleum Council in order to guarantee the complex analysis of data (ADNOC, 2015).

Weaknesses

Subsidiaries adopt accounting standards according to which they prepare financial statements, depending on the sector and the tasks to address.

Opportunities

There are many opportunities to improve accounting and auditing procedures, as well as the company’s internal control policy, with a focus on the comments provided by the Supreme Petroleum Council (ADNOC, 2015).

Threats

If some of the subsidiaries choose to record data according to standards that differ from the approach followed by other companies, auditors, and the Supreme Petroleum Council can experience problems with analyzing the data.

Problem Statement and Research Objectives

The presence of several accounting and auditing standards that are followed, not only in different countries but also in different sectors and industries within one country, allows for speaking about challenges faced by internal and external auditors when they review accounting reports (ADNOC, 2015). The reason is that the same accounts can be recorded in accordance with different standards, including IPSAS and IFRS, among others. Therefore, it is important to study how such large national companies as ADNOC can address the identified problem.

From this point, the study aims to state whether the problem of following different accounting and auditing standards and policies is related to ADNOC, and can be discussed as a challenge for the company in terms of financial planning.

Research Objectives

Examine what accounting and auditing standards are followed by the ADNOC Group of Companies. The significance of this objective is explained by the necessity to analyze the mechanisms and obtain data that will be fundamental for future enhancement. Without understanding the current state of affairs, it is impossible to plan short- and long-term actions.
Analyze if there is a necessity of improving internal control policy, as well as approaches to completing accounting reports and financial statements. This objective is chosen in order to evaluate the actual situation. In the context of different standards, it is equally possible that changes will bring more challenges or improve the setup. Thus, it is necessary to estimate the advantages and disadvantages and come to a conclusion.

Relevant Course Learning Outcomes (CLOs)

The current study is related to the theory of accounting and auditing procedures in different types of organizations, and the following learning outcomes were selected to guide the research and examination of the problem:

BUS4113, CLO 3 – Compare the various accounting treatments of current assets.
BUS4123, CLO 1 – Explain the principles of auditing and professional standards of auditors.
BUS4123, CLO 3 – Evaluate internal control policies and procedures adopted by organizations.

BUS4113, CLO 3 can be discussed as linked to the research, because it is necessary to examine accounting procedures, principles, and treatments followed in different subsidiaries of ADNOC, and to state whether these strategies are similar and whether they allow the complex analysis of reports. BUS4123, CLO 1 is correlated with the necessity to explore and discuss professional auditing procedures followed in state-owned companies. BUS4123, CLO 3 supports the necessity of the evaluation of internal auditing procedures followed by ADNOC, in terms of their effectiveness.

Research Methodology

Secondary research based on qualitative methodology is selected for the study. It is planned to conduct a case study analysis in order to examine patterns of using accounting treatments and auditing standards in ADNOC. The case study will be based on secondary sources and the collected corporate data. Secondary sources will include journal articles, newspaper articles, industry reports, and studies of accounting treatments and auditing procedures adopted in the United Arab Emirates. The information received with the help of examining the secondary data that are presented in the company’s reports will be analyzed and compared while using percents and histograms to illustrate the tendencies observed in the company (Global Data, 2014). Much attention should be paid to finding out what problems in recording data and completing financial statements exist, and what auditing strategies are followed in the company.

Plan of Action

Selection of the research topic – 2 weeks.
Literature review – 4 weeks.
Problem statement – 2 weeks.
Formulation of research objectives – 1 week.
Development of the proposal – 2 weeks.
Secondary research – 6 weeks.
Analysis of data – 4 weeks.
Research writing – 4 weeks.

Conclusion

This proposal provides the problem statement, objectives, and methodology for the planned research regarding accounting and auditing principles adopted by ADNOC. The objectives of the study are correlated with the course learning outcomes, and they serve to achieve the purpose of the research. The plan of action with the set deadlines is also included in the proposal.

References

ADNOC. (2015). 2014 ADNOC sustainability report. Abu Dhabi, UAE: ADNOC Health, Safety, and Environment Division.

ADNOC. (2016). About ADNOC. Web.

Global Data. (2014). Abu Dhabi National Oil Company – power – deals and alliances profile. London, UK: Author.

Global Data. (2016). Abu Dhabi National Oil Company – oil & gas – deals and alliances profile. London, UK: Author.

International Monetary Fund. (2015). United Arab Emirates: Selected issues. Washington, DC: Author.

World Market Intelligence. (2014). Abu Dhabi National Oil Company – company capsule. London, UK: Progressive Media Group.

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