Background   * Powder River Petroleum International, Inc. is a company incorporated in Oklahoma.   * The sector of operation is energy.   * The company primarily markets, acquires, and produces natural gas and crude oil properties.   * The company was founded in 2000 and started by registering securities for small and medium businesses.   * A PCAOB-registered audit firm auditing Powder River Petroleum International, Inc. is Chisholm, Bierwolf, Nilson & Morrill, LLC.   * The firm failed to conduct the company’s audit according to PCAOB Standards and Rules. Expectations   * Powder River Petroleum International, Inc. promised its Asian working interest investors a guaranteed return on their initial investments.   * The company was expected to properly account for its conveyances.   * In addition, the company was expected to conduct its financial activities in accordance with general accounting principles by correctly recording its assets.   * Chisholm, Bierwolf, Nilson & Morrill, LLC was expected to exercise professional skepticism and care, and gather sufficient evidence for its conclusions. Violations   * Since 2004 until 2008 Powder River Petroleum International failed to properly account for approximately $43 million to its Asian investors.   * The company promised a guaranteed return on the investments, but immediately recognized revenues, and thus, dismissing their own promise.   * The financial statements did not properly present cash flows, operating results, and company’s financial position.   * The auditing primarily overstated the company’s assets, pre-tax income, and revenues by a significant margin. Risk Factors and Working Interests   * One of the main risk factors is fraudulent revenue reporting.   * Major liabilities were omitted.   * Assets and revenues were inflated.   * Revenue values were assessed without recognizing the guaranteed payments in working interests.   * Working interests needs to be reported according to Schedule C, which focuses on depletion, expenses, and receipts.   * Working interests and guaranteed payments need to be accounted in conjunction with the company’s direct and indirect operating expenses.   * Working interests are directly tied to net revenue, which means that inflated revenue will change the former value. Management Assertions U.S. auditing standards identify the principal “management assertions” that underline a set of financial statements. What management assertions were particularly relevant to the “sales” of working interest and the guaranteed payments made annually by Power River to the purchasers of those working interests? The management assertions are:   * Accuracy, Classification, Completeness, Cutoff, Existence, Occurrence, Rights and Obligations, Valuation, Understandability.   * In case of the working interests, the Accuracy management assertion is particularly relevant, because the fact that revenues were inaccurately reported changed the value of these interests.   * In case of guaranteed payments, the Right and Obligations assertion is relevant, because the company was obliged to fully disclose these correct amounts to the investors. Fraud   * CBN failed to correctly report the assets owned by Powder River Petroleum International.   * The assets that were not owned by the company were reported as ow