You are undertaking the audit of a large entertainment company, Dazzling Lights Entertainment (DLE) for the year ending 30^th June 2020 which specialises in booking national and international artists for concerts and tours around Australia. The company has been operating since the 1990's and has been previously associated with organising large concert tours for national and international artists in addition to events such as The Big Day Out and large fundraising events. 

 

This is the 4^th year that your firm has been the auditor of DLE and preliminary tests have shown that the internal controls of the organisation are very strong. Average annual turnover for DLE is $56million per year. They employ 300 staff in the organisation, most of which are on fixed term contracts (70%) or casual employment contracts (30%). Approximately 60% of their turnover is from Australian artists with the remainder from international artists.

 

The company generates revenue by organising the events and booking artists into the major concert stadiums in Australia and then charges a fee based on the type of event and the relative stature of the artist(s) involved in the event. If an international artist is involved, the company will charge a higher fee. The venues (stadiums) will pay an upfront fee to DLE which is 60% of the total amount to be paid which is paid to DLE 6 months in advance of the concert. The remainder of the amount owing to DLE from the individual stadiums will be paid after the artist(s) have performed in the venues. DLR had secured the rights in early 2020 for a concert tour of all major cities in Australia by Taylor Swift which was due to occur in 2021.

 

The profits for DLE have been steadily falling over the last 5 years due to decreased turnover and fewer artists touring Australia. In 2017, DLE issued $30million of debentures (due to mature in early 2022) to fund the constructions of new premises on the foreshore of Darling Harbour in Sydney. DLE moved into these premises in late 2019. Their old premises in Sydney CBD were sold in February 2020. The sale required the full amount owing to be paid in August 2020 before the premises could be transferred to the buyer.

 

DLE has faced increasing cancellations of concerts and tours in 2020 due to the impact of the Corona Virus. This has resulted in all casual employees no longer being employed by DLE. It is unlikely that Taylor Swift will be touring Australia in 2021 and it is unlikely that she will be able to return to Australia for the foreseeable future. 

 

In early 2020, the CEO of DLE retired after being the CEO for DLE since it was formed in the 1990's. A replacement started with DLE in November 2019 who previously worked in a major international financial institution.

 

 

Required:

1) Using the information provided in the case study, identify and recommend an appropriate evidence mix for the audit of the entity? In your recommendation (answer), please make sure you use the audit risk model (the components of the audit risk model), to provide a brief justification for the evidence mix you have recommended?