I am not a technical environmental professional, and you will have to walk me through this…maybe even a few times.
Learning the vocabulary of environmental liabilities is an investment and since many auditors did not major in biology, chemistry, environmental engineering, or law, they need a patient and articulate guide to the history and issues in your environmental liability portfolio.
You might not see me again.
Sarbanes-Oxley (2002) requires frequent rotation of external auditors. It is difficult to maintain continuity between auditors and the environmental portfolio managers. While the math will always be double checked, the learning curve will restart with a new auditor next year.
I don’t know if you’re any good at your job.
In a capital project, spending a dollar means the project is a dollar closer to completion (if all goes well). It is difficult for an auditor to tell if a cleanup reserve decreases because the liability is being resolved or estimates are not updated for today’s assumptions.
You should already know how to use the right type of money.
Environmental cleanup work can be completed with asset retirement obligations (AROs), capital expenditures, operating expenses, and reserves. An auditor expects that portfolio managers already know the difference and they only need confirmation that the math adds up.
If you think my audit is tough, just wait.
Whether the company is acquired or makes an acquisition, all of the information will be externally validated in record time. Other major contingent liabilities (i.e., pensions, retiree medical costs, product warranty costs) lend themselves to a few major assumptions and are simpler to merge after an acquisition. Aligning environmental remediation projects, however, can take years, additional research, transparency, and turnover to achieve.