Oil audit loss looms

Arthur Andersen looks set to lose the audit contract for Monument Oil & and Gas when the company merges with rival Lasmo, which is audited by Big Five competitor Ernst & Young.

The Lasmo takeover deal, agreed last week, will also see Monument finance director Liz Airey out of a job.

Airey has agreed to stand down to make way for Lasmo FD Paul Murray, who is also her partner.

The two have had to put the ‘Chinese Walls’ principle to the ultimate test during the multi-million pound negotiations, as the couple share a house in Islington, north London.

The domination of Lasmo in the deal, and its position as acquirer, is expected to spell trouble for Arthur Andersen.

Speaking to Accountancy Age, Airey said the question of who would win the audit contract for the merged oil company could only be answered by Lasmo’s management team. ‘But I have heard no suggestion that E&Y would be dropped as auditor,’ she said.

Airey will receive a £4m golden handshake when she leaves Monument.

The merger will create a £2bn company just smaller than Enterprise, the UK’s leading independent oil company.

The £550m deal will be accounted for as a takeover and Lasmo expects to realise cost savings of up to £7m a year after the combination of the two businesses.

Analysts believe the two groups are a good match. Monument’s healthy balance sheet will help to boost the enlarged group’s finances, and it is thought that the blend of assets and contacts will also make the group stronger.

Arthur Andersen enjoys fees of £103,000 a year for the audit of the Monument operations, while E&Y earned £319,000 for its 1998 audit of Lasmo in the UK. The firm also charged an additional £21,000 for overseas audit work.

Both oil companies pay their accountants fees for additional services.

Andersens’ non-audit fees totalled £78,000 last year, while E&Y made £255,000 for additional services in the UK and £25,000 for non-audit work overseas.

Other accounting firms earned £32,000 for both audit and non-audit work for Lasmo overseas.

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