So, how are they fooling the auditors? Don't they have a big 4 accounting firm auditing them every year to report to the institutional investors?
They used cohn reznik . I'll post later how this audit was botched..
Basically, big 4 have internal valuation teams. Conhn reznik definitely also has some kind of "valuation specialist", but probably not one who knows anything at all about oil fields.
Even at big 4, utilizing valuation specialist does not mean that the auditors perform their own independent valuation. - that is prohibitively expensive.
Here they probably assessed that based on the inputs used by management they can say that the valuation is reasonable. - they did NOT audit the inputs though. A common error...
They also documented low valuation risk due to robust controls over valuation, specifically that the fund used an external independent valuation expert etc etc. These memos are long and winding.. But at the end of the day, there is a very very slim chance auditor has liability.