Question

According to ISA 520, analytical procedure means “the evaluation of financial information through the analysis of plausible relationships among both financial and non-financial data. It includes the investigation of identified fluctuations, or relationships that are inconsistent with other relevant information, or that differ from expected values by significant amount”. Corona virus or the COVID19 pandemic has affected most, if not all, of the business industries not only in Oman but all over the world. This is due to the imposed “lockdown” of areas affected by the pandemic to not spread the disease and worsen the situation. One of the industries that are considered affected by this pandemic is the Entertainment Industry. Based on the news, countries have been preventing mass gatherings of people. This includes stopping the operations of cinemas and gaming centers. Also, because employees are getting sick or afraid to contract the virus, only few are able to report to work. Assume that you are a member of an audit team assigned to analyze the effects of the corona virus (COVID19) pandemic on businesses. Answer the following questions related to this business sector: Entertainment Industry (example VOX Cinema) Required: Answer the following questions on analytical procedures: 1. In your opinion, will this business sector be favorably or unfavorably affected by the COVID19 pandemic? Explain your answer focusing on the financial impact. 2. How could the auditor analyze the financial impact to the industry given? Give at least two suitable examples of analysis that you can use to analyze the impact of the pandemic to a specific business belonging to the entertainment industry, like the VOX Cinema.

Answer 1

The COVID-19 pandemic has had a substantial impact on the film industry, mirroring its impacts across all arts sectors. Across the world and to varying degrees, cinemas and movie theaters have been closed, festivals have been canceled or postponed, and film releases have been moved to future dates or delayed indefinitely. As cinemas and movie theaters closed, the global box office dropped by billions of dollars, streaming became more popular, and the stock of film exhibitors dropped dramatically. Many blockbusters originally scheduled to be released between March and November were postponed or canceled around the world, with film productions also being put on a halt.

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With social distancing mandatory in the United Arab Emirates to help curb the spread of the virus, VOX Cinemas says viewers will be limited to two per car at the open-air venue, which opened on Sunday and can accommodate up to 75 cars at a time.Tickets cost 180 dirhams ($50) per vehicle inclusive of popcorn, snacks and drinks.

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Urban Entertainment Dubai has been considering drive-in cinemas in the UAE for years, even before the pandemic. And now, the company believes they could become a new normal for crowd-wary cinemagoers.

"several projects across the UAE looking to implement drive-in cinemas,"