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7-22 (Understanding the entity and its environment)

7-22 (Understanding the entity and its environment) -...

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Unformatted text preview: 7-22(Understanding the entity and its environment) 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 conditions2. The regulatory environment3. Other external factors affecting the business4. The entity’s business operations5. The entity’s investing activities and financing activities6. The entity’s financial reporting activities7. The entity’s objectives, strategies, and related business risks8. How the entity measures and reviews its financial performance.RequiredFor each of these eight categories (1) describe the knowledge and understanding you wantto 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.Use the following format:KEY CATEGORIESDESCRIBE THE KNOWLEDGEUSED TO DEVELOP AKNOWLEDGEABLE PERSPECTIVE ABOUT HIPSTARIDENTIFY HOW THISKNOWLEDGE MIGHTASSIST IN ASSESSING THERISK OF MATERIAL MISSTATEMENT1.Industry conditions2.Regulatory environment3. Other external factorsaffecting the business4. The client’s businessoperations5. The client’s investing5....
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7-22 (Understanding the entity and its environment) -...

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