Internal Audit

Entertainment and Events Audit Checklist

Entertainment and Events Audit Checklist

The entertainment industry works and flourishes on human emotions. The entertainment sector comprises different segments like TV, radio, event management,  broadcasting, sports and amusement etc. In the last three decades, this sector has gone through a very rapid change, making it one of the fastest-growing sectors in India. Brand Promotion and sponsorship services are also connected with this sector. India is one of the largest media and entertainment markets, and it is also the second-largest TV market in the world. We also have the biggest film industry in the world, and so obviously we have the highest number of tickets sold. Other countries release films after a couple of months, so they remain shocked at the fact that in our country, every Friday, a new film is released. This is also owing to the number of the labour force that we have.

Need for Audit

The purpose of conducting a cinema audit is to confirm accurate cash flows, comparing the exact earnings of the films against what has been presented.

The media scenario has changed from 0 to 200 per cent in the past few decades. Earlier, the general public was not aware of the whereabouts of celebrities, but now, from taimoor to what Kareena cooked in the kitchen, today is out in minutes. All of it has become possible because of the wide coverage by the media industry. During such times, no risk can be taken to make big names come to light negatively. As Indian news also becomes global in seconds. So, it all comes down to the image of the nation on a global platform.

Illegitimate Funding

Directors and producers are desperate to get their versions over the big screen, and rightly so, because they have all the rights to do so. But not every company is determined to play fair. As a result, the producers kept being in the controversy years after the film was released on the screens, and the public might have forgotten about it. So, an audit check is extremely important to disclose the fraud before it is too late.

Revenue Reports

With the advancement of the media but the shortage of knowledge among the general population, it becomes very tricky to analyse if the film has actually got hit or flop unless it is a masterpiece like Mughal-e-Azam or Devdas, etc. False stories might spin around in the name of truth; failures can be termed successes, and the lies can go on and on. So, a proper assessment must be done, which is not only the assessment of funds but character. Fabrications should not be used to fuel the lies.

Loyal Witnesses

Sometimes, because of the high reputation of the artists of the production companies, they do not fear the Courts and cross forget the line between illegal and legal, which gets them into trouble and traps them in huge media coverage. The allegations turn out to become court orders soon. Films get spoiled with the intense and constant legal battles.

Court Value of the Audit Reports

The court value of the audits is that they act as reliable evidence in the Courts of law. These credentials can disprove any sort of formal allegations.

Audits of the Clubs

It is to be verified how much donation a particular club has received. This can be done through the receipts, the register, which is maintained by the club authority, as well as the cashbook. The difference pertaining to the donation being capital or revenue donation should also be checked. An auditor should at all times be aware of the policy of the Managing Committee. The verification is to be done of the outstanding rent along with the rental agreement and cash book. The Auditor must ensure that the books for accounts provide for the provision of the rent outstanding. The physical verification of the wines, crockery and sports materials is suggested. The salary can be verified from the staff appointment and job offer letters and their confidential reports, etc.

Audits of Cinemas and Theatre

There are different sectors of obtaining and generating revenues through movies and shows. These areas are through the movie tickets, the parking lot, and the advertisements and promotions of the film. The Auditor is required to verify and analyse the difference between the tickets for different classes, free passes, and bookings specifically intended for the college or school-going students. The serial number should be there for each ticket. The revenue collection should be deposited in the bank on a day-to-day basis.

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The Auditor should also verify the Entertainment Tax collected with reference to the number of tickets sold. All the tax which is collected by way of tickets sold in the country should be deposited to the Government of India with immediate effect. It is also the responsibility of the Auditor to verify whether the class of vehicles was separated while parking for the movie theatre.

Services relating to the Entertainment Sector (ES)

 The below-mentioned services relating to the ES have been assigned separate Account Codes under Service Tax and are specifically identifiable, too. They are as under:-

  • Broadcasting services,
  • The Copyright services
  • Event Management
  • Studios that record sounds
  • Services that the programme producer offers,
  • Service of promotion or marketing of brand of goods/services/events,
  • The sponsorship services that are provided, like sports sponsorship
  • The agency which produces Video
  • Cable operators.

Legal Frame Work

The business of the entertainment sector is governed by all the provisions of the Income Tax Act that are generally applicable to the various classes of assessees like Companies, Firms, Trusts, Individuals, etc. Moreover, the Income Tax Act/rules provide crucial tax incentives to the assessees of the entertainment sector. The provisions here provide for the deduction in respect of professional income from abroad or foreign sources in case the writer or artist is a resident of India. The deduction is also made with respect to the expenditure on production and on the acquisition of distribution rights of feature films.

The Report Submitted By The Comptroller & Auditor General (Cag)

The Comptroller & Auditor General (CAG) submitted its 31st report to the Parliament of India in the year 2017. The CAG chose this industry because it was one of the fastest emerging and best revenue-generating industries of the time. The CAG, in its report, submitted that the service tax revenue from this sector has seen a remarkable annual average growth rate of about 10% between 2012-13 and 2014-15. Moreover, 60% of tax revenue is from taxes on broadcasting services.

A few cases came into light when the taxable commercial activities escaped taxation due to the clubbing of theatrical rights with non-theatrical rights / other production activities. For example, in M/s. Sohail Khan Productions and M/s Salman Khan Ventures Pvt. Ltd, the producers of ‘Jai Ho’ and ‘Bajrangi Bhaijaan’, the agreement consisted of both theatrical & non-theatrical rights. The producers claimed exemption from Service tax by stating that the entire revenue had been obtained from theatrical rights.

The Comptroller and Auditor General cited the examples of the films Chennai Express and Dabangg 2, where music rights were sold to a company for 6-9 crores, respectively. But the producers continued receiving royalty for the same. The CAG calculated that a service tax of Rs 1.85 crore was leviable. Even here, the CAG did not accept the ministry’s contention.

Ways to Audit in the Entertainment World

There are many unions and guilds in this industry. These organizations enter into collective agreements on behalf of their members. The terms of the contracts dictate their rates of compensation to the actors/actresses, the time frame of work, and the materials that should be provided to them. Prominent performers may negotiate these terms and conditions also depending upon the projects they are working on. The taxpayers here sometimes do not claim reimbursement even after being eligible because they fear not being hired for future projects.

For example, if the taxpayer is allowed to stay in a particular hotel, the expenses of which would be borne by the employer, but the taxpayer still opts for staying in a different hotel at his own expense, in that case, the expense in excess is not considered necessary.

Sports Sector

There have been all-around developments initiated by the government in the sports sector of India, especially with the BJP-ruled government, such as ‘Khelo India’ and the involvement of the private sector in sports by organizing tournaments through various leagues. The sports infrastructure market rested at a value of INR 800 billion in 2016. The sports sponsorship market in India kept growing approximately at the rate of 12.5% on a year-to-year basis in 2015 to reach INR 52 billion. The Entertainment and Sports sectors are both very fast-expanding areas in today’s world, so it is also important to keep track of the revenues they are generating so that they can be utilized by the government to achieve other necessary goals. It is also pertinent to keep a check on whether the income tax is duly levied and collected from these businesses or not.

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Copyrights of the Entertainment Industry

The copyright is automatically created the moment a copyrightable item is created. These rights protect the creative creation of the artist from being stolen by some third party. It applies to artistic works like screenplays, compositions, etc. These are the materials that can be copyrighted: musical works, graphics and pictorial works, motion pictures and audiovisual works, sound recordings, etc.

Any copyright that was in existence prior to January 1, 1978, will go on to endure for 28 years from the date it was secured originally. The copyrights registered before January 1, 1978, can be renewed for the next 95 years. The copyright on a work created on or after 1 January 1978 lasts till the life of the author plus 70 years after the author has expired. This time period is 120 years for the Corporate Authorship.

Auditing by Risk-Based approach

In this approach, the goal is to address the highest-priority risks. A lot of audit departments think that their approach is risk-based, but it is not usually the case. A real risk-based approach refers to the analysis of the top risks that the management and the business face and to mitigate those risks from coming up later on when the investor has already invested money in it. It is entirely the choice of the organization if they want to undergo formal risk assessments or not. Once the risk is identified, risk mitigation plans are generated, and it allows the business to address those particular areas.

Examples of such Techniques

ISO 31000

The standards and guidance of ISOs are internationally recognized, but they cannot be certified against ISO 31000.

COSO

It has a very good Internal Controls Framework. This ERM framework has five integrated principles for managing risk.

NIST

It produces resources for implementing the Risk Management Framework, which consists of seven steps.

Benefits of Risk-based approaches

It mainly allows the internal auditors to quickly deal with the organizational risks without losing any time frame. This approach can also reveal the gaps which are missed by the traditional method.

Techniques to Enhance the Customer Experience

Rapid Assurance

It is intended to reduce audit fatigue. These can also be referred to as ‘mini-audits’.

Auditor Research and Planning

It requires the auditing of the papers and the public documents and obtaining access to document repositories. This process takes around 1-2 weeks.

On-site fieldwork

It refers to the fact that the auditor visits the site and performs interviews, conducts meetings of the status ‘End of Day’ and communicates draft findings to the customers.

Finalizing

It means the final testing and the report writing; look for the target dates in the report.

Skills required for the Auditor

The Auditor should also be very skilled in analyse because the competency of the auditor will ensure that he is able to meet the deadlines. The auditor should have strong project management skills. There are shortened deadlines, so in order to meet them, the auditor is supposed to be very quick. The client should feel less interaction and less burdened in the first week, so the auditor should take care of that also.

Conclusion

The audit checks in the Entertainment industry are of crucial importance because the industry today occupies a global level in India, looking at the amount of audience we target as compared to other nations. India is one of the most populated countries in the world. The audit check ensures that we are not unlocked over the news channels as being frauds or the big names should not flash into the light for some bad reasons or for want of improper audit checks and balances.

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FAQs

  1. What are the five audit checklists?

    The five checklists are-
    1. To establish the programme objectives
    2. Preparation of the audit plan
    3. To perform the audit
    4. To report the audit results
    5. Keep a follow-up and check on the post-audit activities

  2. What is the 5S Audit checklist?

    It refers to sort, set in, order, shine, standardize and sustain

  3. What are the different types of audit checklists?

    Internal audits.
    External audits.
    Financial statement audits.
    Performance audits.
    Operational audits

  4. What is the 5S quality checklist?

    This quality check means the sort, set in, order, shine, standardize and sustain.

  5. What are the 5 elements of audit findings?

    The process of reaching the results includes certain findings: What is the problem? Why does a particular condition happen? How do we know if a certain thing is a problem or not for the auditor? Why does a particular condition really matter, and what will be the effect? How do we solve the condition?

  6. What is an event checklist in event management?

    It means to know the breakdown of the timeline. It is a crucial step to ensure that all the aspects are covered in the event management or not. It also refers to hiring entertainers and vendors for the programme to bring the programme to light.

  7. What is an event checklist?

    The checklist for the event means to analyse and find out whether all the aspects of the event are covered or not. Because sometimes very crucial steps are missed which later on pop up, spoiling the whole programme.

  8. What are the contents of the event checklist?

    The checklist should be prepared before 3-4 months of the event schedule so that no necessary area can be left. For example, the checklist should include the cost of the event, get cost estimates, create an event budget, recruit an event committee, etc.

  9. Why do we need an event checklist?

    An event checklist is required to make sure that no area of the event planning is lying dormant and not taken care of in advance to avoid the spoil of the event at the last minute.

  10. What is a pre-event checklist?

    It means to conduct market research in advance to know the targeted audience. To allocate a budget for the event.

  11. What is the checklist to perform an audit?

    It may be a tool or document required to conduct the audit, like the scope of the audit, etc.

  12. How do you create a checklist for an audit?

    The audit checklist is created by assessing the company's risk level, checking the company's quality management system, etc.

  13. What are the steps in performing an audit?

    The auditor will review the prior audits in the specific area. Then, he will open the meeting. Afterwards, he will report on the drafting. Fieldwork will be conducted, and then the auditor can close the meeting.

  14. What is an audit checklist in ISO?

    The ISO audit checklist helps the auditor to gather information about corrective action, internal issues, etc.

  15. What are the seven stages of event planning?

    The steps are-
    a. The planning should start way before the event comes in.
    b. To mark and create a calendar
    c. To assemble a team
    d. Negotiate with the vendors
    e. 'What' ifs' should be calculated prior to hand
    f. The event planning should be jotted down in writing
    g. And then the sign of relief should be there to avoid last-minute spoils

  16. What are the 10 steps to plan an event?

    These steps include-
    1. The planning beforehand,
    2. to create a day-to-day list,
    3. to assemble the team,
    4. to negotiate with the vendors,
    5. The risks should be calculated,
    6. The plan should be in writing, 
    7. identifying masterships,
    8. brand the event,
    9. advertisements, if any,
    10. to organize and handle the team.

  17. What are the stages of planning an event?

    The stages include a deep analysis of the event going to happen. It requires the organization of the team, assembling the team beforehand, negotiating with the vendors and branding the event.

  18. What are the seven keys of event management?

    The keys are mentioned below-
    1. Core structure
    2. Target audience
    3. Core people
    4. Core talent
    5. Clients
    6. The infrastructure of the event
    7. Main concept of the event

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