Question
Royalty payments for artists are notoriously complex, at best they are ripe with delayed payments and errors, at worst, there is willful fraud.There are complex
Royalty payments for artists are notoriously complex, at best they are ripe with delayed payments and errors, at worst, there is willful fraud.There are complex legal agreements that dictate the payment terms and timing, a delayed reconciliation and more.Let's consider this from the auditor perspective.Please read the 2 articles below and then submit answers to the questions that follow:
- https://www.billboard.com/amp/articles/business/9456657/marsha-sealy-audit-mcs-enterprise-music-contracts-fair-equitable?fbclid=IwAR3LJ-fV4fXhxsis3oOhGttV4g6wpqZdMWztXUk9rDucSp9OBtFgRFDQBWM
- https://www.theguardian.com/music/2018/may/24/spotify-to-pay-out-112m-in-royalties-to-songwriters
Assume you are the auditor of a royalty contract and you are focused on the following 3 sources of revenue:
Streaming:customers pay a monthly fee to have access to music through a source like Spotify (Spotify pays the artists the royalties for each time the song is streamed),
Digital sales:customers purchase and download the music, and
Radio revenue:customers listen for free (with ads!), the radio company pays royalty fees to the artists.
Please answer the following questions
1.Identify the 2 most relevant assertions you would test related to these sources of revenue (just 2 assertions in total, not 2 for each account).Explain why you feel these are the most relevant assertions; in other words, what is the company claiming or asserting about these accounts that is of most importance to the auditor?Make it clear if an assertion is only related to 1 of the revenue accounts.
2.Describe 1 analytical procedure you would design for EACH of the accounts above and explain why this would be meaningful evidence (so 3 analytical procedures).Consider how non-financial information could be used for auditor expectations.
3.Describe 1 other audit procedure to test 1 of the assertions you identified, please be detailed in your description.
4.Describe 1 internal control that would prevent or detect errors in these accounts.
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