It was discovered that Stumacher did not follow the professional guidelines and standards laid down by the professional bodies governing the audit of financial statements, when he undertook the job of auditing Video’s financial statements – for the fiscal year 2002 and fiscal year 2003. The depth to which he did not follow the guidelines include the general auditing standards and frameworks, fraud considerations, audit risk and disclosure, proof of evidence of work, measures of analysis, documentation and professional vigil and handling capabilities in managing the audits.
Stumacher, during the audit of Video’s financial statements, did not comply with the rules pertaining to field work and was unsuccessful in measuring audit risk, evidence, materiality, consideration for fraud. He did not prepare any documentary procedures to evaluate and measure audit r
...isk. He was unable to state the audit risk sufficiently an was not vigilant enough to pick out noteworthy creative reporting tasks as well as major risks in the business.
Procuring sufficient evidence to the accounting data was a necessary task for Stumacher; however he failed to perform this and additionally was not able to review any supporting evidential documents apart from the Cornerstone agreement presented by the management at Video for his perusal. There were no labors on Stumachers part to gain more knowledge about the agreement, review any corroborating evidence regarding it nor were there any records available as to the price of the Cornerstone stock in addition to the loss of recorded sales data for the year 2003 to the distributor.
Furthermore, Stumacher did not carry out any investigation into the account balances in the ledgers, was lethargi
in examining related-party transactions and did not display any analytical methods of disseminating data to verify the accounting subtleness of the data. He also did not prepare nor maintain any kind of documentation to support the presumptions he made or the conclusions he presented; thus signifying very acute evidence upon which he formed his conclusions, majorly affected by the financial statements of Video for the years 2002 and 2003.
Stumacher did not prepare or execute any audit schedules, recorded memoranda, plans, meetings, appointment letters, commitment evidences or documents that would testify to meet the minimum auditing requirements and standards. His audit was poorly conducted and was very much divergent from the GAAP standards, did not comply with GAAS and his audit reports of Video for the years 2002 and 2003 presented by Stumacher were not according to and upto the standards required by GAAP.
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