Media and
Entertainment
business include companies for movie studios, TV station groups, Cable
distribution companies, Radio broadcasting companies, Advertising companies,
Interactive gaming companies, Book publishing companies, Newspaper publishing
companies and Internet companies. Media and Entertainment businesses live or
die based on how well they identify and manage trends.
Telecommunications is a general term and
include a vast array of technologies that transmit and receive voice, data, and
video information over varying distances through electronic means. Telecommunications
is a huge industry, comprising companies that make hardware, produce software
and provide communication services.
The main area of concern
for auditors while conducting the audit of a telecom media or entertainment
company is to verify their revenue. Telecom operators continue to lose billions
of dollars every year due to revenue and fraud leakage. Most telecom companies
principally obtain revenue from providing the following telecommunication
services: access charges, airtime usage, messaging, interconnect fees, data
services and information provision, connection fees and equipment sales.
Products and services may be sold separately or in bundled packages. The fast
pace of change and intense commercial competition increase the likelihood of
mistakes. There is significant complexity in determining the combined effect of
interacting systems and processes; and the high-volume, low-value nature of
transactions amplifies the financial implications of "small" errors.
Another area of concern for auditor is to verify the license fee
paid by media and telecom companies to the government and compliance of
companies with the regulations imposed under the provisions of these licenses
by the government.
Fixed assets verification particularly
in telecom service provider companies is also an area which requires auditor’s
significant attention. Telecommunications is a very capital-intensive industry,
with the fixed assets of network infrastructure forming a large part of a
telecom company’s balance sheet whether it is a fixed line, mobile or fiber
network. Fixed assets management remains an important competitive
differentiator as it presents significant operational and internal control
challenges. Auditor should be diligent in reviewing asset lives manually, as
well as in a more sophisticated manner with the use of client integrated ERP
systems generated reports.
Additional
Thoughts
While conducting the audit
of a telecom media or entertainment sector company; the principal rules remain
the same for the auditor. The auditor should understand the entity and its environment,
in which it is operating and identify and assess the risks of material
misstatement. On the basis of this understanding the auditor should frame audit
procedures to minimize the audit risk to an acceptable level.
