Coliseum Entertainment Corporation is one of the worlds largest hotel and gaming entertainment companies. Coliseum is a publicly-traded company; its stock trades on the New York Stock Exchange (NYSE) under the CEC ticker symbol. The company, which first went public in 1973, is currently experiencing financial pressure stemming from debt obligations incurred as part of its recent acquisition of a large competitor. One of Coliseums strategies to increase revenue has been to expand entertainment offerings and encourage increased traffic to its existing hotel and gaming properties. With this strategy in mind, Coliseum constructed a new attraction, the Reel Wheel, which opened on April 1, 20X4.

The Reel Wheel is an observation wheel located at a new outdoor mall situated between two of Coliseums hotel properties on the Las Vegas Strip. The Reel Wheel is the largest observation wheel in the world, standing 550 feet tall. It has 28 observation cars, each holding up to 40 people. The cars have 225 square feet of interior space, and each weighs roughly 44,000 pounds. It takes approximately 30 minutes for the wheel to make a complete rotation. The Reel Wheel operates daily year-round from 11:00am to 2:00am, with the exception of four service days. Operations between 11:00am and 5:00pm are considered day time rides; those between 5:00pm and 2:00am are considered night time rides. During night time operations, the wheel lights up with more than 2,000 LED lights that bathe the wheel and its riders in a rainbow of bright and colorful lights. 2 Within each of the 28 observation cars, interior lighting, TV monitors, music, and sound effects entertain guests while the wheel is in motion. Although Coliseum primarily displays its own advertising images in each of the observation cars, it also sells advertising space to complementary businesses. The Reel Wheel also generates revenue through the sale of food and beverages, photos, and Coliseum-themed souvenirs from a gift shop located at the base of the observation wheel. Because of the allure of seeing the Las Vegas Strip at night, night time rides are charged a premium. Children 12 and under always ride free on the Reel Wheel, and Las Vegas locals receive a 40% discount off of regularly-priced tickets. In order to entice more people to ride the Reel Wheel during the hottest summer months, a discounted price structure ($5.00 off each ticket) was offered during the third quarter of 20X5 (July through September). Locals are not eligible for the summer pricing structure, but they continued to get 40% off of regular ticket prices. In addition to selling tickets to tourists and locals, the Reel Wheel also sells tickets in wholesale batches to travel agencies, local hotels, and other tourism-related services that bundle the tickets together with vacation packages and other offerings. The wholesale ticket prices do not vary based on time of day or season.

Coliseums Annual Audit Coliseum has engaged one of the largest public accounting firms in the world to conduct the annual audit of its financial statements. The engagement audit partner has asked you, a third year associate with the firm, to oversee the audit of Ticket Sales Revenue generated by the Reel Wheel during the 20X5 calendar year. Coliseums unaudited reported Ticket Sales Revenue balance for the year is $73,468,219. The amount of tolerable difference (a.k.a., tolerable error) allocated to this account is $675,000. The underlying internal controls related to ticketing revenue have been tested, and no significant deficiencies or material weaknesses were identified.

Part 2: Performing the Audit Procedure As part of the annual audit of Coliseum Entertainments 20X5 financial statements, the engagement audit partner has encouraged you a third-year associate auditor to develop a substantive analytical procedure to test Coliseums 20X5 Ticket Sales Revenue account for the Reel Wheel attraction. After carefully reviewing the appropriate auditing standards, you approach the appropriate personnel at Coliseum and request the data needed to create your data analytic. Appendix A of this case contains a copy of the requested data related to ticket sales revenue generated by the Reel Wheel during 20X5.

Use Excel to create analytics showing your solutions to the following three questions. Use separate tabs to show your work in analyzing each question.

Questions:

Part 2:

2.1 In order to better understand whether the number of total passengers in 20X5 (as reported by Coliseum) is reasonable, develop a quick estimate of the maximum number of passengers possible during 20X5. In other words, how many passengers could ride on the Reel Wheel if every passenger car was filled to capacity for the entire year? In addition to documenting maximum capacity, show how many passengers would have experienced the Reel Wheel if it ran at 75%, 50%, and 25% of maximum capacity. Refer to the client data you requested, and document the percentage of total capacity that the clients reported number represents. Based upon your capacity calculations, does the number of reported passengers seem reasonable?

Part 3: Reflect on the Engagement

3.1 Given your objective of using the analytical procedure to provide most of the assurance needed regarding the Ticket Sales Revenue account for the Reel Wheel, is the estimate developed in 2.3 precise enough, or is more precision needed? Explain.

3.2 Given that much of the data used in your analytical procedure is provided by your client, what additional audit procedures could you supplement this substantive analytic with to provide additional corroborating evidence that these ticket sales actually occurred?

3.3 Assuming the clients controls are effective, how might the auditor use data analytics tools to audit the ticket sales revenue account? How would the evidence obtained using data analytics (i.e., ability to effectively analyze every sales transaction during the year) compare with the evidence from both substantive analytical procedures and tests of details in terms of effectiveness and efficiency? What additional insights might the auditor be able to identify using data analytics?

3.4 Some companies use a third-party service provider to sell tickets to customers and to collect tickets upon entrance into the venue. When performing audits of clients who use these third-party service providers, the auditor often relies upon SOC 1 reports provided by CPAs who audited the service providers internal controls. There are two types of SOC 1 reports, Type I and Type II. Research the AICPAs website and briefly explain what a SOC 1 Type II report is. Consider how your approach to auditing the Ticket Sales Revenue account might be different if a third-party ticket provider with a SOC 1 Type II report were providing these services for the client and was therefore the source of the ticket sales data you requested (e.g. number of passengers, ticket prices, seasonality, daytime vs. nighttime rides

A.01 Coliseum Entertainment Substantive Analytical Procedure - Ticket Sales Revenue: The Reel Wheel Year-end Audit: December 31, 20X5 Workpaper (WP) ID: Date: Prepared By: 20x5 Unaudited Account Balance (Ticket Sales Revenue) Account Data Point Ticket Sales Revenue (unaudited) $73,468,219.00 Allocated tolerable difference 675,000.00 Unit Label dollars dollars Tickmark PBC WP Reference from Trial Balance A4.09 WP Reference Unit Label feet cars square feet passengers minutes Tickmark PBC, RW PBC, RW PBC, RW PBC, RW PBC, RW PBC, RW PBC, RW Tickmark PBC PBC PBC Tickmark RW RW 20x5 Summary Information & Data for "The Reel Wheel" Description Data Point Observation Wheel Height 550 Number of Passenger Cars 28 Interior Space per Car 225 Maximum Capacity per Car 40 Time Required for Car Revolution 30 Hours of Operation (Open) 11:00am Hours of Operation (Close) 2:00 am Description (20x5 calendar year) Data Point Days in Operation 361 Total Passengers 3,058,452 Total Children Passengers 250,389 Description (20x5 calendar year) Data Point Regular Ticket Price (Child: Age 0 - 12) $ Regular Ticket Price - Day (Adult; Age 13+) 24.95 Regular Ticket Price - Night (Adult; Age 13+) 34.95 Summer Ticket Price - Day (Adult: Age 13+) 19.95 Summer Ticket Price - Night (Adult: Age 13+) 29.95 WholesaleTicket Price 12.95 WP Reference from A.02 A.02, A.03 WP Reference Unit Label days passengers passengers Unit Label dollars dollars dollars dollars dollars dollars RW RW RW PBC Notes - Where noted, data is verified at multiple sources (eg, PBC, RW). - The Reel Wheel sells some tickets to wholesalers - such as third-party travel websites - if booked as part of a travel package that includes a stay at a Coliseum hotel. . Although not specifically listed on the RW website, prices for Las Vegas locals (Photo ID required) are 40% off of Regular Adult (Day, Night) prices. No summer discount for locals. . Tickmark Legend PBC Provided by client (Coliseum Entertainment) Sourced from Reel Wheel public website RW A.02 Coliseum Entertainment Substantive Analytical Procedure - Ticket Sales Revenue: The Reel Wheel Year-end Audit: December 31, 20X5 Workpaper (WP) ID: Date: Prepared By: 20x5 Ticket Sales Data for "The Reel Wheel" [Provided by Client] Tickmark WP Reference PBC January February March Q1 20X5 April May June Q2 20X5 July August September Q3 20x5 October November December Q4 20x5 20x5 Total Total Passengers 245,163 228,455 261,996 735,614 255,898 270,268 256,758 782,924 270,000 260,209 256,207 786,416 273,523 246,589 233,385 753,497 3,058,451 Unit Label people people people people people people people people people people people people people people people people people PBC to A.01 Tickmark Legend PBC Provided by client (Coliseum Entertainment) A.03 Colisum Entertainment Substantive Analytical Procedure - Ticket Sales Revenue: The Reel Wheel Year-end Audit: December 31, 20X5 Workpaper (WP) ID: Date: Prepared By: 20x5 Ticket Sales Mix (% for "The Reel Wheel" [Provided by Client] Tickmark PBC January February March Q1 Children (0 - 12) Day Night 4.2% 3.3% 4.7% 3.1% 4.1% 3.3% 4.3% 3.2% Adults (13+) Day Night 22.4% 43.8% 22.8% 41.6% 23.1% 43.6% 22.8% 43.0% Locals Day Night 4.5% 8.7% 4.9% 9.4% 4.0% 7.8% 4.5% 8.6% Wholesale Day Night 5.2% 7.9% 5.0% 8.5% 5.8% 8.3% 5.3% 8.2% 100.0% April May June Q2 4.3% 4.6% 4.9% 4.6% 3.8% 3.0% 4.3% 3.7% 23.9% 24.1% 23.6% 23.9% 41.2% 44.2% 44.7% 43.4% 4.7% 4.3% 4.6% 4.5% 9.0% 8.9% 9.3% 9.1% 5.1% 4.2% 3.7% 4.3% 8.0% 6.7% 4.9% 6.5% 100.0% 4.0% July August September Q3 4.9% 4.9% 4.1% 4.6% 4.1% 3.4% 3.8% 22.2% 21.6% 22.9% 22.2% 41.2% 43.3% 42.6% 42.4% 5.2% 4.8% 4.6% 4.9% 10.4% 11.0% 10.4% 4.9% 4.4% 5.3% 4.9% 7.2% 5.9% 6.7% 6.6% 10.6% 100.0% October November December Q4 4.5% 4.5% 4.3% 4.4% 3.7% 4.1% 4.1% 4.0% 23.1% 23.7% 23.0% 23.3% 43.2% 42.9% 42.5% 42.9% 4.1% 4.0% 4.2% 4.1% 9.7% 8.8% 8.4% 9.0% 4.9% 5.0% 5.4% 5.1% 6.8% 7.0% 8.1% 7.3% 100.0% PBC Tickmark Legend PBC Provided by client (Coliseum Entertainment) O A.01 Coliseum Entertainment Substantive Analytical Procedure - Ticket Sales Revenue: The Reel Wheel Year-end Audit: December 31, 20X5 Workpaper (WP) ID: Date: Prepared By: 20x5 Unaudited Account Balance (Ticket Sales Revenue) Account Data Point Ticket Sales Revenue (unaudited) $73,468,219.00 Allocated tolerable difference 675,000.00 Unit Label dollars dollars Tickmark PBC WP Reference from Trial Balance A4.09 WP Reference Unit Label feet cars square feet passengers minutes Tickmark PBC, RW PBC, RW PBC, RW PBC, RW PBC, RW PBC, RW PBC, RW Tickmark PBC PBC PBC Tickmark RW RW 20x5 Summary Information & Data for "The Reel Wheel" Description Data Point Observation Wheel Height 550 Number of Passenger Cars 28 Interior Space per Car 225 Maximum Capacity per Car 40 Time Required for Car Revolution 30 Hours of Operation (Open) 11:00am Hours of Operation (Close) 2:00 am Description (20x5 calendar year) Data Point Days in Operation 361 Total Passengers 3,058,452 Total Children Passengers 250,389 Description (20x5 calendar year) Data Point Regular Ticket Price (Child: Age 0 - 12) $ Regular Ticket Price - Day (Adult; Age 13+) 24.95 Regular Ticket Price - Night (Adult; Age 13+) 34.95 Summer Ticket Price - Day (Adult: Age 13+) 19.95 Summer Ticket Price - Night (Adult: Age 13+) 29.95 WholesaleTicket Price 12.95 WP Reference from A.02 A.02, A.03 WP Reference Unit Label days passengers passengers Unit Label dollars dollars dollars dollars dollars dollars RW RW RW PBC Notes - Where noted, data is verified at multiple sources (eg, PBC, RW). - The Reel Wheel sells some tickets to wholesalers - such as third-party travel websites - if booked as part of a travel package that includes a stay at a Coliseum hotel. . Although not specifically listed on the RW website, prices for Las Vegas locals (Photo ID required) are 40% off of Regular Adult (Day, Night) prices. No summer discount for locals. . Tickmark Legend PBC Provided by client (Coliseum Entertainment) Sourced from Reel Wheel public website RW A.02 Coliseum Entertainment Substantive Analytical Procedure - Ticket Sales Revenue: The Reel Wheel Year-end Audit: December 31, 20X5 Workpaper (WP) ID: Date: Prepared By: 20x5 Ticket Sales Data for "The Reel Wheel" [Provided by Client] Tickmark WP Reference PBC January February March Q1 20X5 April May June Q2 20X5 July August September Q3 20x5 October November December Q4 20x5 20x5 Total Total Passengers 245,163 228,455 261,996 735,614 255,898 270,268 256,758 782,924 270,000 260,209 256,207 786,416 273,523 246,589 233,385 753,497 3,058,451 Unit Label people people people people people people people people people people people people people people people people people PBC to A.01 Tickmark Legend PBC Provided by client (Coliseum Entertainment) A.03 Colisum Entertainment Substantive Analytical Procedure - Ticket Sales Revenue: The Reel Wheel Year-end Audit: December 31, 20X5 Workpaper (WP) ID: Date: Prepared By: 20x5 Ticket Sales Mix (% for "The Reel Wheel" [Provided by Client] Tickmark PBC January February March Q1 Children (0 - 12) Day Night 4.2% 3.3% 4.7% 3.1% 4.1% 3.3% 4.3% 3.2% Adults (13+) Day Night 22.4% 43.8% 22.8% 41.6% 23.1% 43.6% 22.8% 43.0% Locals Day Night 4.5% 8.7% 4.9% 9.4% 4.0% 7.8% 4.5% 8.6% Wholesale Day Night 5.2% 7.9% 5.0% 8.5% 5.8% 8.3% 5.3% 8.2% 100.0% April May June Q2 4.3% 4.6% 4.9% 4.6% 3.8% 3.0% 4.3% 3.7% 23.9% 24.1% 23.6% 23.9% 41.2% 44.2% 44.7% 43.4% 4.7% 4.3% 4.6% 4.5% 9.0% 8.9% 9.3% 9.1% 5.1% 4.2% 3.7% 4.3% 8.0% 6.7% 4.9% 6.5% 100.0% 4.0% July August September Q3 4.9% 4.9% 4.1% 4.6% 4.1% 3.4% 3.8% 22.2% 21.6% 22.9% 22.2% 41.2% 43.3% 42.6% 42.4% 5.2% 4.8% 4.6% 4.9% 10.4% 11.0% 10.4% 4.9% 4.4% 5.3% 4.9% 7.2% 5.9% 6.7% 6.6% 10.6% 100.0% October November December Q4 4.5% 4.5% 4.3% 4.4% 3.7% 4.1% 4.1% 4.0% 23.1% 23.7% 23.0% 23.3% 43.2% 42.9% 42.5% 42.9% 4.1% 4.0% 4.2% 4.1% 9.7% 8.8% 8.4% 9.0% 4.9% 5.0% 5.4% 5.1% 6.8% 7.0% 8.1% 7.3% 100.0% PBC Tickmark Legend PBC Provided by client (Coliseum Entertainment) O