In July 2010, British Petroleum (BP) released its second quarter 2010 earnings report. The report discussed the risks associated with the ongoing events and cleanup effort in the Gulf of Mexico due to the oil spill associated with BP. It also included an income statement with a $32 billion pretax charge and a notation that second quarter and first half 2010 include a charge of $32,192 million in production and manufacturing expenses, and a credit of $10,003 million in taxation in relation to the Gulf of Mexico oil spill.

In conducting the annual audit, BPs auditors would have obtained assurance that the client accurately reported and disclosed the contingency in connection with the oil spill.

In its FYE 2013 Form 20-F, BP disclosed that the total charge since the incident had risen to $42.7 billion and that the company had put an additional $20 billion into the Deepwater Horizons Oil Spill trust to fund future expenditures relating to the oil spill.

There is a movie about British Petroleums oil spill in the Gulf of Mexico, Deepwater Horizon, which documents the failures in oversight and internal controls, and poor decision making that led to the disaster. If your instructor asks, or you are just curious, watch the movie and consider the following questions:

Who was most at fault in causing the disaster?

Who were the heroes and what did they do right?

What types of internal controls and governance might have prevented the disaster?

Why didnt one of the people on the oil rig cut off the well sooner?

What role did BPs corporate culture play in the disaster?

What types of evidence do you think the auditors would have obtained to assess the appropriateness of the disclosure?