Management needs assurance that the organization is in compliance with various policies and controls. Assume you are the auditor of a major movie studio. The movie studio has contracts with many major stars who sign to make a movie for a minimum fixed amount of money, but sign a contract to collect x percent of all residuals. As an example, one contract with a major star states that the star will receive:

• 10% of all revenues from showing the movie in the United States on its first release

• 7% of all revenues from showing the movie in the United States on its second release (The second release is any time 5 years or more after the first showing.)

• 6% of all revenues from showing the movie outside of the United States

• 4% of all sales of the movie on the video market

Required

Develop an audit program, starting with preliminary planning through the audit tests needed, to determine whether the company is in compliance with all major contracts.