Bill Lee retired in the mid-1990s from Triton Energy after leading the Dallas-based oil and gas exploration firm through three turbulent decades. During Lee’s tenure, Triton discovered large oil and gas deposits in several remote sites scattered around the globe. Although adept at finding oil, Triton’s small size hampered the company’s efforts to exploit its oil and gas properties. Major oil firms, large metropolitan banks, and other well-heeled investors often refused to participate in the development of promising oil and gas properties discovered by Triton. Why? Because they were unnerved by Bill Lee’s reputation as a run-and-gun, devil-may-care “wildcatter.” 

To compensate for Triton’s limited access to deep-pocketed financiers, Lee resorted to less conventional strategies to achieve his firm’s fi nancial objectives. In the early 1980s, Triton struck oil in northwestern France at a site overlooked by many major oil fi rms. To expedite its drilling efforts and to gain an advantage over competitors that had begun snapping up leases on nearby properties, Triton formed an alliance with the state-owned petroleum firm, Compagnie Francaise des Petroles. This partnership proved very beneficial for Triton since it gave the firm ready access to the governmental agency that regulated France’s petroleum industry. A business journalist commented on Triton’s political skills as a key factor in its successful French venture. “Triton’s success is due not just to sound geology but also to good politics. It has established a close relationship with the all-powerful French energy administration, which issues all new drilling permits.”1 Triton’s policy of working closely with government agencies and bureaucrats landed the company in trouble with U.S. authorities during the 1990s. Charges that Triton bribed foreign officials to obtain favorable treatment from governmental agencies led to investigations of the company’s overseas operations by the U.S. Department of Justice and the Securities and Exchange Commission (SEC). These investigations centered on alleged violations of the Foreign Corrupt Practices Act of 1977, including the accounting and internal control stipulations of that federal statute. 

L. R. Wiley founded Triton Energy Corporation, the predecessor of Triton Energy Ltd., in 1962. At the time, industry analysts estimated that there were approximately 30,000 businesses involved in oil and gas exploration, most of which were small “Mom and Pop” operations. The volatile ups and downs of the petroleum industry dramatically thinned the ranks of oil and gas producers during the 1960s and 1970s. The oil bust of the 1980s wiped out most of the surviving firms in the industry. Fewer than 20 significant “independent” oil and gas producers remained in business by 1985.2 Triton Energy was one of those fi rms. Bill Lee joined Triton in the early 1960s and was promoted to chief executive officer (CEO) in 1966. Under Lee, Triton competed in the rough-and-tumble business of oil and gas exploration by employing a rough-and-tumble business strategy. Lee recognized that the large domestic oil firms in the U.S. had already identified the prime drilling sites in this country. So, Lee decided that Triton should focus its exploration efforts in other oil-producing countries, particularly in regions of those countries largely overlooked by “Big Oil.” During Lee’s tenure with Triton, the company launched exploration ventures in Argentina, Australia, Canada, Colombia, France, Indonesia, Malaysia, New Zealand, and Thailand.

In the early 1970s, Triton discovered a large oil and gas field in the Gulf of Thailand. Recurring disagreements and confrontations with the Thai government stymied Triton from developing that field for more than 10 years. Lee’s experience with the Thai government taught him an important lesson: If Triton’s exploration ventures were to be successful in foreign countries, the company had to foster good relationships with key governmental officials in those countries. Lee created Triton Indonesia, Inc., a wholly owned subsidiary of Triton Energy, to develop an oil field that the company acquired in Indonesia in 1988. This oil field, located on the island of Sumatra and known as the Enim Field, belonged to a Dutch firm in the 1930s. At the time, Sumatra was a protectorate of the Netherlands. When the Japanese invaded Indonesia during World War II, retreating Dutch soldiers dynamited the Enim Field to render it useless to Japan. Over the next four decades, the dense jungles of Sumatra reclaimed the oil field. In the mid-1980s, Lee learned of the potential oil reserves still buried in the Enim Field. A small Canadian company owned the drilling rights for those reserves. Triton wrested control of the drilling rights from that company in a protracted legal battle. After investing several million dollars and several years of hard work in the Enim Field, Triton began pumping thousands of barrels each day from the long dormant oil reservoir.

Triton’s strategy of working closely with officials of the Indonesian government contributed greatly to the success of the Enim Field project. To strengthen Triton’s ties to those officials, the company hired a French citizen, Roland Siouffi , as a consultant. Siouffi , who had resided in Indonesia for nearly three decades, served as Triton’s liaison with Indonesian tax authorities and with governmental agencies that oversaw the country’s oil and gas industry.

In 1991, Triton struck black gold again, this time in Colombia. Several large firms had drilled exploratory wells in the foothills of the Andes Mountains that stretch across Colombia. Those wells came up dry. Nevertheless, geological reports convinced Lee and other Triton executives that the region contained large but well-hidden oil reservoirs. Lee and his colleagues were right. In 1991, Triton pinpointed huge oil and gas deposits trapped in complex geological structures lying beneath the Colombian jungles. These reservoirs were the largest discovered in the western hemisphere since the 1968 Prudhoe Bay discovery in Alaska. Again, Triton established close working relationships with governmental officials, this time in Colombia, to develop the new oil field......

Questions

1. Identify the key factors that complicate the audit of a multinational company.

2. Identify specifi c control activities that Triton Energy could have implemented for Triton Indonesia and its other foreign subsidiaries to minimize the likelihood of illegal payments to government offi cials. Would these control activities have been cost-effective?

3. Does an audit fi rm of a multinational company have a responsibility to apply audit procedures intended to determine whether the client has complied with the FCPA? Defend your answer.

4. If a company employs a high-risk business strategy, does that necessarily increase the inherent risk and control risk components of audit risk for the company? Explain.

5. What responsibility, if any, does an accountant of a public company have when he or she discovers that the company has violated a law? How does the accountant’s position on the company’s employment hierarchy affect that responsibility, if at all? What responsibility does an auditor of a public company have if he or she discovers illegal acts by the client? Does the auditor’s position on his or her firm’s employment hierarchy affect this responsibility?

6. If the citizens of certain foreign countries believe that the payment of bribes is an acceptable business practice, is it appropriate for U.S. companies to challenge that belief when doing business in those countries? Defend your answer.