Financial Statement …show more content…
In October 2001, 20,000 workers lost their jobs and over a million investors lost their nest eggs when the energy trading company Enron declared bankruptcy after years of using false accounting measures to cover up billions of dollars in debt (Black, 2013). Enron Corporation committed financial statement fraud, which was brought to light in 2001 by whistleblower, Sherron Watkins. Enron used the deliberate misstatement or omission of amounts or disclosures located in the financial statements. Their sole purpose was to deceive financial statement users. This affected particularly investors and creditors who had no idea of Enron 's financial standing. Financial statement fraud may involve falsification, alteration, manipulation of records, intended omissions, and deliberate misapplication of accounting principles (Wells, 2014). The CEO and president believed that what they were doing was for the benefit of the shareholders, but in reality, they were only harming everyone. Enron developed and opened a plant in India and there was absolutely no profits. However, checks were cut to pay bonuses for doing so …show more content…
To complete this task, the auditor would select a random sample of 20 accounts receivable with values exceeding $100,000 dollars for confirmation. After the auditor received the results, he or she would then follow the trail to determine why these amounts may be fraudulent or overstated. After the auditor determines that fraud may exist, he or she can then begin the process of determining what is causing the misstatement. A misstatement could be an error that is either intentional or unintentional. These errors will be found in the financial statement account balance or a single transaction. Magnitude of an omission or misstatement of accounting information that, in view of surrounding circumstances, makes it probable that the judgment of a reasonable person relying on the information would have been changed or influenced by the omission or misstatement (Johnstone, 2015.)