Strengthening confidence through proactive joint-venture and contract audits

In complex joint ventures (JV) and commercial arrangements, trust is essential, but so is transparency. Where one party is responsible for operating the venture, managing suppliers or allocating shared costs, an independent audit can provide confidence to all parties that charges, obligations and processes are aligned with the agreement.

Why these audits matter

JV and contract audits are often associated with energy, resources, and infrastructure, but the underlying principle is much broader: wherever parties share costs, risks, outputs or obligations under a contract, there is value in independently testing whether those arrangements are operating as intended.

A joint arrangement exists where parties are bound by a contractual arrangement and share joint control, with decisions about relevant activities requiring unanimous consent among the controlling parties. The contract is therefore central, it sets out the rights, obligations, cost-sharing rules, governance arrangements, and decision-making framework that underpin the relationship.

This creates an important challenge in practice, as even in well‑structured ventures the administration of shared costs can become increasingly complex over time. Large capital programs, affiliate charges, overhead allocations, contractor spend, rebates, variations and manual workarounds can all create disconnects between the commercial intent of the agreement and what is actually charged or recovered.

What a JV or contract audit looks at

A JV audit typically examines whether charges and credits applied by the operator comply with the governing agreement and any related accounting procedures. A contract audit, meanwhile, may focus more closely on whether vendor or contractor payments align with agreed pricing, rates, milestones, service terms or allocation methodologies.

From a forensic accounting perspective, the objective is not just to identify overcharges. These reviews can also highlight control weaknesses, poor supporting documentation, inconsistent interpretations of the contract, and governance gaps that increase the risk of dispute or value leakage.

When organisations should act

One of the most common mistakes organisations make is waiting too long and, in many arrangements, audit and challenge rights are time-limited so the opportunity to review and recover costs can narrow if action is delayed. That is why JV and contract audits are often most effective when they are planned as part of a broader assurance program, rather than triggered only once tensions emerge.

Common triggers include unexplained increases in shared costs, major project milestones, changes in operators or contractors, concerns around overhead or affiliate charges, or repeated difficulty obtaining clear supporting records. These are not always indicators of wrongdoing, but they are often signs that the arrangement would benefit from a structured, independent review.

What organisations can discover if they look closer

In one multi-party project, a participant observed a material increase in its share of support and contractor costs over several reporting periods. While management wanted to maintain a constructive relationship with the operator, it required greater confidence in how those costs were being allocated.

BDO’s forensic services team carried out a targeted JV audit focused on high-risk transactions and cost categories. This involved analysing allocation methodologies across reporting periods, testing selected contractor costs back to supporting documentation, and assessing whether overhead charges were consistent with the governing agreements and usual cost recovery principles. Through that work, the team identified inconsistent allocation methods, limited support for some contractor charges, and a broader-than-expected interpretation of recoverable overheads.

Importantly, the value of the JV audit was not limited to identifying exceptions. By bringing a clear fact base, commercial perspective, and structured analysis to the discussion, the BDO team helped the client engage with the operator in a measured and constructive way. The review supported financial adjustments where appropriate and helped establish clearer protocols for documentation, approvals and future cost allocations.

That is often the most valuable outcome: not simply recovery, but stronger governance and fewer friction points going forward.

The broader business case

At a practical level, these audits help answer a critical question: are we paying and sharing costs in the way we agreed? They can uncover billing errors, duplicated charges or non-compliant cost allocations, but they also help organisations preserve value, improve transparency and strengthen their position if a dispute later arises.

For boards and executives, there is also a broader governance benefit. Independent review demonstrates that significant shared-cost arrangements are being actively overseen, rather than simply accepted at face value. In a risk environment where organisations are expected to act early and maintain robust compliance frameworks, that level of assurance matters.

Joint ventures are designed to share opportunity and risk. Where contractual arrangements are complex and expenditure is significant, independent assurance can be the difference between passive reliance and informed oversight. A well-timed joint-venture or contract audit does more than validate costs - it supports better governance, clearer accountability and stronger commercial relationships.

How BDO can help

BDO’s forensic services approach is built around helping organisations take a proactive stance on risk, compliance and defensible governance before issues escalate.

If you need support with any of the issues raised in this article, contact us today.