Auditors failing to publicly test optimistic assumptions by companies
(Toronto, November 3 2025) . A new report finds that Canada’s top 15 oil and gas producers could be underreporting their decommissioning liabilities by billions of dollars, with significant implications for shareholder equity. The Investors for Paris Compliance (I4PC) report, Accounting for the Canadian Oil & Gas Liabilities Gap, details how the companies’ accounting practices systematically downplay liabilities, and finds a $113 billion gap between what’s in the 15 sets of financials compared to a leaked Alberta Energy Regulator (AER) estimate of liabilities.
“Investors need transparency and accuracy from companies on the full scale of their liabilities, particularly as the energy transition calls into question whether these costs may come due sooner than anticipated,” said Jessica Carradine, Senior Analyst with I4PC. “Furthermore, investors rely on auditors to provide assurance that key assumptions underlying liabilities costs have been tested, but there is no public evidence that any of them have done so.”
The report adds to a growing body of research warning that energy companies around the world may not be providing full financial transparency on the potential costs they face to shut down and clean up their infrastructure. The report finds:
- A widespread failure to disclose financially material factors, such as timelines for cleanup and sensitivity analyses of key factors such as estimated costs, inflation, and discount rates.
- Accounting judgments that minimize liabilities in the financials, such as overly-long timelines for remediation, high discount rates, and rosy assumptions regarding future commodity prices that ignore the energy transition.
- Companies reporting about $67 billion of liabilities in today’s market prices vs. their share of the leaked AER estimate of $180 billion, a $113 billion gap, or 2.7 times what appears in their financials.
- An across the board failure of auditors to publicly assess decommissioning liabilities assumptions, despite significant impact on shareholder equity. The AER estimate of $180 billion is more than half the total market capitalization of the 15 companies.
“This lack of accounting transparency and auditor oversight puts billions in company valuations at risk,” said Carradine. “Canadian Oil and gas institutional investors need to put tough questions to the board audit committees, and signal to the outside auditors that they will not vote for their reappointment should better assurance not be forthcoming.”
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