Audit and Accounting Guide: Gaming


First update in 2 years! This publication includes over 200 pages of invaluable guidance to help you improve your gaming industry knowledge, fine-tune your strategies, and provide high-quality services to your clients.

This guide was developed by leading experts from industry and public practice. It summarizes new standards, guidance, and practices and delivers “how-to” strategies for handling audit and accounting issues common to entities in the Gaming industry.

It explains the accounting and auditing for many types of Gaming industry issues, including up-to date information such as recently issued Accounting Standards Updates and GASB Statements and their effect on the industry.

Founded in 1887, the American Institute of Certified Public Accountants (AICPA) represents the CPA and accounting profession nationally and globally regarding rule-making and standard-setting, and serves as an advocate before legislative bodies, public interest groups and other professional organizations. The AICPA develops standards for audits of private companies and other services by CPAs; provides educational guidance materials to its members; develops and grades the Uniform CPA Examination; and monitors and enforces compliance with the accounting profession’s technical and ethical standards.
The AICPA’s founding established accountancy as a profession distinguished by rigorous educational requirements, high professional standards, a strict code of professional ethics, a licensing status and a commitment to serving the public interest.
Industry Overview .01-.46

Gaming in the United States  .01-.24

Casino Gaming .01-.09

Native American Gaming .10-.11

Lotteries .12-.16

Other Gaming .17-.24

Regulation and Oversight .25-.37

Brief Descriptions of the Games .38-.46

Table Games .39

Card Games .40

Slot Machines .41-.42

Keno .43

Bingo .44

Race and Sports Betting .45

Online Real Money Gaming .46

2 Guide Scope and Applicability .01-.04

3 Overview of Gaming and Gaming Related Revenue .01-.42

Introduction .01-.13

Overview of Transactions in the Casino and the Casino Cage .14-.42

Overview of Table Game Transactions .14-.32

Overview of Incentive Programs in the Gaming Industry .33-.42

4 Jackpot Liabilities .01-.10

Background .01

Summary of Selected Accounting Literature .02

Types of Jackpots for Purposes of Accounting for Jackpot Liabilities .03-.07

Accounting for Jackpots .08-.10

5 Participation and Similar Arrangements .01-.09

Background .01-.03

Summary of Selected Accounting Literature .04

Analysis of Lease Criteria for Various Pricing Arrangements .05

Conclusions and Income Statement Presentation .06-.09

6 Loyalty and Incentive Programs .01-.29

Summary of Selected Accounting Literature .01

General Description of, and Accounting for, Loyalty and Incentive Programs .02-.12

Section Paragraph

6 Loyalty and Incentive Programs--continued Discretionary Incentive Programs .03-.08

Nondiscretionary Incentive Programs .09-.12

Specific Accounting for Various Discretionary Incentives .13-.16

Free Play Offered Other Than Through Loyalty Programs .13

Cash or Cash Equivalents Offered Other Than Through Loyalty Programs .14-.15

Complimentaries Offered Other Than Through Loyalty Programs .16

Specific Accounting for Various Nondiscretionary Incentives .17-.28

Free Play Offered Through Nondiscretionary Loyalty Programs .17-.19

Cash or Cash Equivalents Offered Through Nondiscretionary Loyalty Programs .20-.21

Complimentaries Offered Through Nondiscretionary Loyalty Programs .22-.26

Nondiscretionary Loyalty Programs in Which Customers Have the Option of Choosing Multiple Types of Incentives .27

Incentive Programs That Provide Customers With Designated Status Without Entitling Customers to Any Economic

Benefits .28

Financial Statement Disclosures .29

7 Gaming License, Project Development, and Preopening and Start-Up Costs .01-.15

Background .01-.02

Summary of Selected Accounting Literature .03

Costs to Obtain a Gaming License .04-.11

Project Development Costs .12-.13

Preopening and Start-Up Costs .14-.15

8 Managing Properties for Third Parties .01-.21

Background .01-.04

Summary of Selected Accounting Literature .05-.06

Accounting by the Gaming Entity Managing the Third Party Owned Property .07-.15

Gaming Entity’s Costs Prior to Obtaining the Management Agreement .07-.11

Gaming Entity’s Costs Related to an Existing Management Agreement .12-.14

Financial Statement Classification of Amounts Paid on Behalf of the Managed Property .15

Accounting by the Managed Property .16-.19

Disclosures .20-.21

Section Paragraph

9 Guarantees .01-.29

Introduction .01

Summary of Selected Accounting Literature .02-.27

Initial Recognition and Measurement of the Guarantee .04-.13

Income Statement Effect at Initial Recognition .14

Classification of the Contract or Customer Acquisition Cost .15

Subsequent Measurement of the Liability .16-.22

Subsequent Measurement of the Asset .23-.27

Financial Statement Disclosures .28-.29

Applicability of FASB ASC 810, Consolidation .29

10 Long-Lived Assets .01-.21

Introduction .01

Summary of Selected Accounting Literature .02-.20

Long-Lived Assets to Be Held and Used .03

Triggering Events .04-.06

Grouping Long-Lived Assets to Be Held and Used and Related Issues .07-.12

Estimates of Future Cash Flows Used to Test a Long-Lived Asset for Recoverability .13-.20

Asset Retirement Obligations .21

11 Other Accounting Topics .01-.28

Intangible Assets Acquired in a Business Combination .01-.04

Jackpot Insurance .05-.13

Background .05-.07

Characteristics of Jackpot Insurance Policies .08-.10

Accounting for Jackpot Insurance .11-.13

Gaming Chips and Tokens Liabilities .14-.18

Racetrack Fees .19-.23

Background .19-.21

Accounting for Racetrack Fees .22-.23

Segment Reporting .24-.26

Uniforms and Other Long-Lived Assets .27

Deferred Income Taxes for Casinos .28

12 Governmental Gaming Entities .01-.20

Background .01

Summary of Selected Accounting Literature .02-.03

Basic Financial Statements and Required Supplementary Information .04-.10

Resource Flows Between Governmental Gaming Entities and Sponsoring Governments .11-.13

Section Paragraph

12 Governmental Gaming Entities--continued Allocation of Assets and Liabilities Within the Financial Reporting Entity .14

Impairment of Capital Assets .15-.20

Segment Reporting .20

13 General Auditing Considerations .01-.186

Introduction .01-.04

Terms of Engagement .05-.10

Opening Balances--Initial Audit Engagements, Including Reaudit Engagements .11

An Audit of Financial Statements .12-.24

Planning the Audit .14-.16

Audit Risk .17-.22

Use of Assertions in Obtaining Audit Evidence in the Assessment of Risks of Material Misstatement .23-.24

Materiality .25-.31

Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement .32-.40

Discussion Among the Audit Team .39

Industry Risk Factors .40

Related Parties .41-.44

Responsibilities of the Auditor .43-.44

Risk Assessment Procedures .45-.47

Designing and Performing Further Audit Procedures .48-.54

Identification of Significant Risks .52

Analytical Procedures Used in Risk Assessment .53-.54

Understanding of Internal Control .55-.64

IT Considerations .65-.72

Consideration of Fraud in a Financial Statement Audit .73-.111

Introduction .73-.75

Professional Skepticism .76-.77

Discussion Among the Engagement Team .78-.81

Incentives or Pressures .82-.84

Opportunities .85-.86

Attitudes and Rationalizations .87

Misappropriation of Assets .88-.91

Risk Assessment Procedures and Related Activities .92-.95

Identification and Assessment of the Risks of Material Misstatement Due to Fraud .96-.99

Responses to the Assessed Risks of Material Misstatement Due to Fraud .100-.102

Evaluation of Audit Evidence .103-.107

Auditor Unable to Continue the Engagement .108

Section Paragraph

13 General Auditing Considerations--continued Communications to Management and With Those Charged With Governance .109-.110

Documentation .111

Consideration of Laws and Regulations .112-.117

Responsibility for Compliance With Laws and Regulations .113-.117

Audit Performance and Execution .118-.126

Designing and Performing Further Audit Procedures .118-.126

Timing of Audit Procedures .127-.130

Analytical Procedures Used in Audit Performance .131-.135

Audit Documentation .136-.143

Timely Preparation of Audit Documentation .139-.142

Assembly and Retention of the Final Audit File .143

Auditor’s Consideration of Using the Work of Internal Auditors .144

Using the Work of Other Specialists .145-.149

Evaluation of Misstatements Identified During the Audit .150-.151

Written Representations .152-.160

Written Representations as Audit Evidence .153-.160

Communication With Those Charged With Governance .161-.166

Going Concern Considerations .167-.175

Audit Procedures .169-.170

Consideration of Conditions and Events .171

Consideration of Financial Statement Effects .172

Consideration of the Effects on the Auditor’s Report .173

Communicate With Those Charged With Governance .174

Documentation .175

Group Audit Engagements .176-.181

Definition of a Component .179-.180

Group Audit Technical Practice Aid .181

Other Information, Supplementary Information, and Required Supplementary Information .182-.186

14 Special Auditing Considerations .01-.52

Cash Balances and Revenue Cutoff .02-.06

Components of Cage Accountability .03-.04

Cage Procedures .05-.06

Tests of Accountability .07-.13

Cutoff Procedures .14-.22

Table Games .16-.17

Slot Machines .18-.19

Other Games .20-.22

Online Gaming .23

Section Paragraph

14 Special Auditing Considerations--continued Drop and Count Procedures .24-.27

Receivables .28-.31

Background .28-.31

External Confirmation of Gaming Receivables .32-.45

Mail Circularization .42

Oral Responses .43-.44

Alternative Procedures When No Reply Is Received .45

Branch Offices .46

Allowance for Doubtful Accounts .47-.52

Special Considerations for New Gaming Operations .49

Unannounced Audit Procedures .50-.52

15 Internal Control .01-.53

Introduction .01-.08

Gaming Internal Control Considerations .09

Granting and Control of Credit .10-.15

Approval of Credit Lines and Maintenance of Credit Files .10

Issuance of Credit .11-.12

Recording of Credit Transactions .13

Custody of Markers .14-.15

Bingo .16-.19

Cage .20-.22

Card Games .23-.25

Gaming Tournaments .26

Information Technology .27-.30

Keno .31-.34

Lotteries .35-.37

Promotions and Incentive Programs .38

Race and Sports Book (for Computerized Systems) .39-.43

Slot Machines .44-.49

Table Games .50-.53

16 Analytical Procedures .01-.12

Introduction .01-.04

Types of Analytical Procedures .05-.12

Table Games and Poker .10-.12


A The New Revenue Recognition Standard: FASB ASU No2014-09

B Mapping and Summarization of Changes--Clarified Auditing Standards

C Illustrative Financial Statements

D Illustrative Guidance When Accounting for Guarantees

E The New Jersey Casino Reinvestment Development Authority

F Currency Transaction Reporting in the Gaming Industry

G Rules of the Games

H Schedule of Changes Made to the Text From the Previous Edition


Index of Pronouncements and Other Technical Guidance

Subject Index