Professional Standards & Competencies Flashcards

A CPG is retained by an investment bank for due diligence on an acquisition. What is the appropriate scope of work documentation?

Answer: A written engagement letter defining scope, limitations, and intended use

A written engagement letter is required to define the scope, limitations, data sources, and intended use of any professional evaluation.

Under CPG standards, 'economic producibility' for proved reserves requires that production must be profitable:

Answer: Under existing economic conditions at the effective date of the estimate

Proved reserves must be economically producible under existing economic conditions as of the effective date, not based on forecasted future conditions.

A CPG discovers that a report she co-signed contains a material error made by her co-author. What is her professional responsibility?

Answer: She shares responsibility and must work to correct and reissue the report

Co-signers share professional responsibility for the entire report; material errors must be corrected and the report reissued with notification to appropriate parties.

What does the concept of 'continuous professional development' require of active CPG holders?

Answer: Completing required continuing education to maintain current knowledge

CPG holders must complete continuing education requirements to stay current with evolving technical standards, methods, and regulations.

Which of the following scenarios most clearly violates the principle of professional independence for a CPG reserves evaluator?

Answer: The CPG's fee is contingent on the reserve estimate reaching a minimum threshold

Contingent fees that depend on the outcome of the evaluation create an impermissible financial incentive that undermines professional independence.

In preparing a reserves report, a CPG notes that the operator's production data differs from third-party measurements. What is the correct approach?

Answer: Investigate the discrepancy and disclose it in the report

Data discrepancies must be investigated and disclosed, as unresolved differences can materially affect the reliability of the reserves estimate.

A CPG working for an operator is pressured by management to accelerate proved undeveloped reserve (PUD) bookings beyond what drilling plans support. What is the ethical course of action?

Answer: Book only those PUDs supported by a specific adopted development plan within five years

SEC and SPE-PRMS rules require that PUDs be supported by a specific, adopted development plan scheduled to be implemented within five years.