Auditing Challenges in Entertainment Business: Livent, Inc. Case Study

Livent, Inc. is a business that is really associated with the entertainment service, generally in live theatrical productions. When handling a company in the show business, there are numerous dangers that can be included in auditing circumstances. A huge danger that can be typical is dealing with the higher officers of the business who are not highly educated in the financial field. They are only acquainted with the home entertainment part of it and do not focus on a lot of the financial resources.

It prevails for the board and higher management in the entertainment field to only fret about the amount of skill supplied in their item and the quantity of people that are in the seats.

They do not know and frequently do not would like to know just how much it costs since it is not on their priority list. Their main goal is to put the best actor and actress on the phase and put as many people in the seats as possible.

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A danger that was typical in Livent was their ability to take expenses for one program and moving some of it to another show for the future or in the past that had actually been more effective. Auditing for live theatrical performances is a bit various than a common audit. The auditors have to look at a lot of different costs, investments, earnings from several shows and durations, and a lot more. A possible technique is auditing the business without much communication between the auditing client and the CEO or other top officers of the business.

The responsibilities of a CFO and an audit partner are similar and different. The CFO is a highly ranked officer of a business who oversees the spending routines of a business and all of its monetary reports, activities, and scenarios. The CFO ensures that the assets invested are spent sensibly and need to be spent for the right reasons. They desire to be sure it utilized for the growth and benefit of the business. An audit partner is generally a 3rd party individual that a company picks from an externally customer, to come in and review all the accounting practices of the business. The audit partner will study the monetary records and inform the company of any changes that ought to be made.

The audit partner is there to see that the company is reporting numbers correctly, legally, and ethically. They are similar because they both oversea the finances of a company. The auditor just makes sure that the CFO is approving the financial activities that he should approve. Personally, I would rather be the CFO of a company. It is a lot of responsibility but as long as you keep your company profitable while following rules and laws then you shouldn’t be in trouble. The CFO is also much more important because you oversea many people and you have to make sure that they are following rules as well. An auditor is important but if a company is doing everything legal and their numbers are correct, how important are they?

Corporate executives may consider their auditors to be evil because an auditor may tell them a lot of bad news, from their numbers is off, you are doing stuff illegally, and much more negatives. An auditor is usually the one to find what the company is doing wrong whether they know it or don’t know it. I don’t feel that auditors are the ones who can change the perspective of how corporate executives feel about them. The only way this will change is if companies start reporting correctly and legally. So, it is up the company to change their own mind because the ones who feel the auditors are evil are usually the ones doing the evil acts.

Another accounting firm is retained when an auditor-client conflict arises during an audit engagement. This happens mainly to get a professional opinion from a non-biased opinion. They are brought in to find a possible solution or find who is in the wrong and right or the situation. They are to write a report stating the facts and an audit report of the company as well. The non-bias report is extremely important when solving the dispute.

I feel that Deloitte should have let them report the $12.5 million transaction in the third quarter. There is a reason two third parties reviewed the report and both allowed Livent to follow through with the third quarter report. Depending on how they reported other large transactions, then that’s how they should report this one as well.

She felt that she had ties to both Livent and Deloitte, and these ties would be hurt either way if she reported wrong doings in the accounting practices or the auditors. No matter what she felt she was guilt because she knew about it on the Livent side and she knew what was going wrong on the Deloitte side of the battle. Either way she looked, she felt that she had some bit of responsibility for reporting the fraud for Livent and for Deloitte. After discovering the fraudulent schemes, you obviously have to report them and change the ways of the how they are practicing fraud. Clearly she knew there was fraudulent activities taking place and she could have done a lot more to help solve the situations and clear it up.

There are now standards that apply to the auditing and the investigations performed by accounting firms regarding due diligence. It is required that auditors know about the company that there are auditing for. It is also a standard that the CEO and CFO have an understanding and approve of the financial statements reported by the company. Auditors must be independent from the company that they are auditing, unlike Livent and Deloitte where Maria Messina had ties into both companies. The Surbanes-Oxley Act was a key role in the standards that apply.