Instructional case: Rock Star Promotions, Inc.

Abstract

Abstract Rock Star Promotions, Inc. is an instructional case that incorporates both auditing and legal concepts. The objectives are five-fold. The first objective is to raise the issue of client acceptance procedures. The second objective is to examine the effect of special engagements on the assessment of audit risk under GAAS. The third objective is to expose students to the difficulties associated with the concept of independence in a real-world situation. The fourth objective is to examine the evidence gathering process and evaluate the persuasiveness of alternative types of evidence. Finally, the fifth objective is to increase student awareness and knowledge of the issues surrounding the current “litigation crisis” and the related legal liability for auditors. This case summary is based on the fact situation in the case of Hagen Sign Corp. v. KDI Corp. (In re KDI Corp.), 2 B.R. 503 (Bankr. S.D. Ohio 1980). Overall, the facts presented in this case represent original litigation filed against a CPA firm and are used to illustrate the complex operating environment faced by the audit profession.