Accounting for Casinos
Part I: Audit Risks and Procedures for Casinos
In assessing the audit risk of a specific company, one must first look at the audit concerns of the overall industry in which it operates. Therefore, in order to properly evaluate Caesars Entertainment Corporation, the gaming industry must be taken into consideration. Specifically, industry trends and strategies, competitors, business processes, regulation and oversight, special accounting and financial reporting practices, internal controls, major risks, as well as the implications of those risks will be addressed.
Industry Trends and Strategies
While the gaming industry was once considered to be “recession proof,” it endured significant losses at the height of the global economic downturn. However, a quick recovery appears to have taken place as revenues began to slowly increase in 2009 and 2010. Furthermore, the future appears to be looking good for the gaming industry since casino operations have recently been legalized in four more states including Kansas, Missouri, Maine, and Massachusetts. On the other hand, the market is believed to be reaching its saturation point in the United States with the industry experiencing difficulty in reaching a value higher than $62 billion. With this apparent problem, a number of companies operating in the gaming industry have foregone opportunities to expand in the United States for more favorable opportunities in Europe and Asia. Another factor expected to have a significant effect on traditional casinos is the rapid growth of online gambling which now accounts for 20% of the total revenue generated by the gaming industry (Koustas 1,2).
Key Competitors
The main competitors in the gaming industry operate in the United States as well as abroad. Their sources of revenue include casinos, restaurants, bars, hotel lodging, entertainment venues, and retail shopping. The most notable companies are listed below (“Key” 1).
* Ameristar Casinos, Inc. * Boyd Gaming
In assessing the audit risk of a specific company, one must first look at the audit concerns of the overall industry in which it operates. Therefore, in order to properly evaluate Caesars Entertainment Corporation, the gaming industry must be taken into consideration. Specifically, industry trends and strategies, competitors, business processes, regulation and oversight, special accounting and financial reporting practices, internal controls, major risks, as well as the implications of those risks will be addressed.
Industry Trends and Strategies
While the gaming industry was once considered to be “recession proof,” it endured significant losses at the height of the global economic downturn. However, a quick recovery appears to have taken place as revenues began to slowly increase in 2009 and 2010. Furthermore, the future appears to be looking good for the gaming industry since casino operations have recently been legalized in four more states including Kansas, Missouri, Maine, and Massachusetts. On the other hand, the market is believed to be reaching its saturation point in the United States with the industry experiencing difficulty in reaching a value higher than $62 billion. With this apparent problem, a number of companies operating in the gaming industry have foregone opportunities to expand in the United States for more favorable opportunities in Europe and Asia. Another factor expected to have a significant effect on traditional casinos is the rapid growth of online gambling which now accounts for 20% of the total revenue generated by the gaming industry (Koustas 1,2).
Key Competitors
The main competitors in the gaming industry operate in the United States as well as abroad. Their sources of revenue include casinos, restaurants, bars, hotel lodging, entertainment venues, and retail shopping. The most notable companies are listed below (“Key” 1).
* Ameristar Casinos, Inc. * Boyd Gaming