(Bloomberg) Noble Group, the commodity trader battling criticism of its accounting, stepped up its public defense by publishing an auditor’s report in support of its practices.

The study commissioned from PricewaterhouseCoopers LLP and released by Noble on Monday states that the firm complied with international rules in valuing long-term contracts. PwC qualified its assessment by saying the trader needs to improve governance and the methodology it uses to value the deals.

Noble has lost more than half its value since mid-February when a group calling itself Iceberg Research criticized its practices. Others including short-seller Muddy Waters LLC have since joined in the scrutiny, questioning accounting processes at the Singapore-based firm.

The trading house, which also reported a decline in quarterly profit on Monday, said the PwC report vindicated its business model.

“We have received a strong validation of our processes and controls,” Chairman Richard Elman said in a statement. PwC cautioned that its work was limited and it had no mandate to review individual transactions or accounts.

Share Slump
Noble is seeking to shore up a share price that this month touched its lowest since the financial crisis in 2008, while protecting its investment-grade credit rating. Standard & Poor’s cut Noble’s outlook to negative from stable in July.

In its 37-page report, PwC said Noble’s “approach to valuations” was consistent with international regulations and standard industry practice and in some aspects was “more sophisticated than that of many non-financial companies.”

Noble has previously published letters and statements rejecting the allegations of Iceberg, which has declined to confirm its identity but says it’s “a group of financial analysts.” Noble, which hired PwC last month to conduct the review, has also bought back stock at least 11 times since June and last week redeemed $735 million in outstanding bonds.

“PwC saying that the contract valuations look good is a positive,” said Ray Wepener, a proprietary credit trader at NH Investment & Securities HK Ltd. in Hong Kong. “From PwC’s side, Noble has been in play so they need to be confident as to their conclusions.”

Governance and Oversight
The auditor’s study suggests Noble still has work to do to convince shareholders and credit agencies of the strength of its processes.

While PwC reported improved governance and oversight in the past year, it said Noble should curb reliance on “key individuals” in measuring contract values and give the board more details on the forward commodity prices it uses to calculate them.

Iceberg said in a statement the report didn’t answer its concerns.

“The market wants to know the real value” of the firm’s long-term contracts, it said.

Noble brought forward its second-quarter results by three days following the recent share decline. Net income fell 4.5 percent from a year earlier to $63 million, while the company continued to burn through cash as it used up working capital: Net debt grew to $4.33 billion at the end of June from $3.97 billion in March and $3.06 billion in December.

Contract Valuations
The so-called net fair value of its long-term commodity contracts fell to $4.08 billion at the end of June from $4.56 billion in March because of the “roll-off of short-term contracts in oil,” Noble said. Contract valuations known as Level 3 in accounting jargon—a source of concern to its critics—increased to $1.18 billion from $1.04 billion.

PwC recommended that Noble implement a formal process for “stress-testing” its mark-to-market valuations, which are designed to reflect current market value rather than book value. The auditor also said the firm should improve transparency regarding the cash realized from long-term contracts compared with the gains from mark-to-market valuations.

—With assistance from Christopher Langner in Singapore and Yuriy Humber in Tokyo.

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