An Internal Control Evaluation Tool For Advertising Revenue In The Newspaper And Magazine Publishing Industry

Abstract

Even before the recent economic downturn, the newspaper and magazine publishing industry had been experiencing unprecedented change, with some companies facing an immediate need to either invent a new business model or else cease operations.  The current economic slowdown has, in many cases, exacerbated those challenges.  These trends have had the effect of increasing the risk of fraudulent financial reporting.  The revenue cycle continues to be one of the most important areas for auditors to examine for possible fraud and one for which strong, comprehensive internal controls are especially important (AICPA 2002).  This paper presents an internal control review checklist for advertising revenue in the newspaper and magazine publishing industry.  This checklist may be used by independent auditors as a general benchmark in performing a preliminary evaluation of a company’s internal controls over advertising revenue.  In instances where important internal controls on the checklist have been omitted from the client’s system, the auditor should consider whether the omission increases audit risk.  The checklist may also be used by CFOs or controllers in the industry to help determine whether their company’s internal control system is adequate.