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Understanding Your Auditing Environment - HipStar Recording Industry

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You have just been assigned as in-charge accountant on HipStar, Inc. a new audit client in the recording industry. HipStar is an emerging growth company that finds new recording artists, records their music, and distributes the music directly to consumers exclusively over the Internet. The company does not produce CDs or tapes and does not distribute the artist's music through traditional distribution channels. In order to better understand HipStar, you have set out to understand
the following:

1. Industry conditions
2. The regulatory environment
3. Other external factors affecting the business
4. The entity's business operations
5. The entity's investing activities and financing activities
6. The entity's financial reporting activities
7. The entity's objectives, strategies, and related business risks
8. How the entity measures and reviews its financial performance.

Required:
For each of these eight categories (1) describe the knowledge and understanding you want to obtain about HipStar to develop a knowledgeable perspective about the entity and (2) identify how this knowledge might assist in assessing the risk of material misstatement.

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Solution Summary

Your response is 544 words in a table in Excel that indicates what you would ask about (with client or industry experts) and how this information would help you to discern inherent risks, control risks and potential elements of a fraud triangle.

Solution Preview

Your response is 544 words in a table that indicates what you would ask about ...

Solution provided by:
Carol Sargent, PhD
Education
  • BSc, University of Virginia
  • MSc, University of Virginia
  • PhD, Georgia State University
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