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Oliver L Campbell :Are PDVSA and
the external auditors at odds?

With reference to my article entitled "PDVSA''S results for 2010 still not published," I have learnt from a reliable source that the delay is due to a disagreement with the external auditors, Rodríguez Velázquez y Asociados, who are associates of KPMG. It seems the auditors will not give a "clean" opinion unless certain changes are made to the figures, or the notes make reference to the disputed aspects. However, I have no knowledge of what the disagreement is about and can only speculate on the possible areas of contention. There are four matters I should certainly raise with PDVSA management if I were in the external auditor's shoes .

1) Provision for claims under arbitration . The provision at 30 September 2010 was only $1.5 billion, though the claims made for expropriated assets exceed $30 billion. Certainly, the amounts awarded will not reach that figure, but a provision of some $10 billion would seem more commercially prudent than one of $1.5 billion.

2) Trade receivables under energy agreements . These are sales from long term credit arrangements and the receivables amounted to some $2.0 billion at 30 September 2010. At that same date, sales receivables aged more than 180 days amounted to $1.2billion These figures indicate a questionable credit risk.

3) Dividends payable to minority investors. PDVSA has been remiss in declaring and paying dividends to the minority investors in the so-called "mixed companies" because of cash flow problems. This is a potential liability which need s to be highlighted in the notes to the accounts.

4) Pension fund fraud . The pension fund has been defrauded of around $400 million by companies that were entrusted to manage the funds. This occurred through PDVSA'S gross incompetence since the company was responsible for choosing the managers and monitoring the results. It is only right and proper PDVSA should bear the cost of making good this loss.

It is to be hoped PDVSA and the external auditors will soon reach an agreement on the matters under dispute since the accounts have been delayed long enough. However, I am sure KPMG will not bow to any pressure from PDVSA which goes against sound accounting principles..


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Oliver L Campbell , MBA, DipM, FCCA, ACMA, MCIM was born in El Callao in 1931 where his father worked in the gold mining industry. He spent the WWII years in England, returning to Venezuela in 1953 to work with Shell de Venezuela (CSV), later as Finance Coordinator at Petroleos de Venezuela (PDVSA). In 1982 he returned to the UK with his family and retired early in 2002. Petroleumworld does not necessarily share these views.

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Petroleumworld News 07/15/2011

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