Audits on oil and natural gas transactions

Audits are performed on oil, natural gas, and natural gas by-product royalty and tax transactions in B.C.

You may, at any time, be subject to an audit that may result in a recalculation of your royalties and freehold production tax. 

An audit is an examination of your business' records to ensure that you're correctly reporting and paying royalties and tax, and to identify any areas where you may be doing this incorrectly.

All audits are held to the service and conduct standards outlined in the Taxpayer Fairness and Service Code. 

On this page

• Process of an audit
• Getting invoiced from an audit
• Adjusting previously audited information
• Keeping records
• Disposing of records

Process of an audit

If your business has been selected for an audit:

1.  An auditor will contact you to discuss the exchange of information and go over the general audit process.
2. The auditor will carry out the audit, usually through a desk audit process. If a field audit is required, the auditor will contact you to arrange a convenient time and date for the audit. 
3. When the audit is complete, the auditor will provide you with a proposal letter and working documents that fully explain the findings. The auditor will also make you aware of your options if you disagree with the results.

The results of the audit could affect your business partners. 

Getting invoiced from an audit

During the audit, the Ministry of Finance may identify errors that must be amended to recalculate your royalties and tax. 

If the audit relates to errors from a production month before October 2018, the ministry will adjust information on your behalf and royalties will be recalculated on your next regular invoice. 

If the audit relates to errors from a production month after October 2018:

• For pricing, gas cost allowance or producer cost of service errors, the ministry will recalculate and make adjustments on your next regular invoice
• For other information errors, you must amend your information in Petrinex to receive the adjustments on your next regular invoice. Further instructions will be provided at that time

Adjusting previously audited information 

If you need to make an adjustment to information previously audited, you need to contact us. If you make a material change in Petrinex, we will be notified and will review your adjustment.

Keeping records

You must keep all books and records, as required under the Petroleum and Natural Gas Act. 

You will be asked to produce records for the audit, such as:

• Accounting records
• Invoices
• Contracts and agreements
• Schematics and flow diagrams
• Volumetrics

Prepare and retrieve records ahead of time so that the audit can be completed as quickly as possible. In the case of records stored off-site, ask the auditor which records are needed to avoid wasting time and money.

Disposing of records

You must get written permission from the Minister of Finance before you dispose of your records.

If your records are not available when they are requested under an audit, the royalty collector is authorized to deem a price or amend volumes and then reassess based on information available from other sources.