Reference no: EM132929702

Problem 1: Perform the assessment using the COSO framework based on this case. Please only use the information from the case. E.g. you do not have to list all controls that could have been there, but are not mentioned. OilCo is an oil company based in Montreal. It operates oil wells and refineries (process plants where raw oil is transformed into gasoline, fuel, etc.) all over Canada. The company has been in business for 25 years, but recently was under a lot of pressure from competition, and has been losing money. As such top management had to have a round of layoffs in October of 2019 where hundreds of employees were let go, because the company could no longer maintain the same payroll. In January of 2020 one of the pipes of the refinery near Montreal broke. John Aud is the senior auditor in charge of investigating the problem. First of all John was very surprised by the oil spill, since he knew that OilCo was very interested in safety of all pipes and machinery used in refineries. Safety was also strongly emphasized in the code of ethics. Furthermore, internal auditors review the controls of Montreal location every year, and their review in August of 2019 did not indicate any problems. John learned that corporate layoffs strongly affected the Montreal refinery because half of the people in maintenance responsible for inspecting the pipes and machinery for damage were let go. The company had strict procedures in place to inspect pipes and machinery every week, and any damage had to be fixed immediately. The results of all inspections and repairs had to be recorded in weekly inspection reports. John reviewed all inspection reports and noted that inspection reports were missing for multiple weeks, including several weeks leading up to the problem. As soon as the spill happened, the CEO immediately informed the authorities, investors, and the public. As a result of the spill the company faced a number of significant problems due to law suits and fines. The CFO set aside a $20 million reserve to cover potential losses resulting from the spill, and booked contingent liabilities for the law suits that have not been settled yet.