## Audit of Cinema Halls

### Internal Control Framework

Entry only through printed, serially numbered tickets.
Different ticket series for each class (stalls, balcony, box) and each show — prevents reuse.
Advance bookings maintained under a separate ticket series.
Ticket inventory controlled by a responsible official.

### Key Audit Areas

#### Ticket Revenue

Verify statement of tickets sold prepared at the end of each show.
Reconcile tickets issued vs. tickets returned (unsold) vs. tickets sold.
Check cash sale of tickets — trace to daily collection sheets.
Verify free passes — these must be authorised; tally passes issued against revenue foregone.

#### Taxes

Verify entertainment tax (where applicable) and GST on ticket sales.
Ensure taxes collected are correctly deposited.

#### Advertisement Revenue

Verify advertisement agreements and amounts received against invoices.

#### Distributor Settlements

Check agreements with distributors — percentage share or minimum guarantee basis.
Verify advances paid to distributors and adjustments against earnings.

#### Fixed Assets & Depreciation

Projection equipment, seating, building — verify depreciation calculations.

#### Restaurant/Café Income

Audited on the same lines as club food & beverage income (pricing, margins, inventory).

Worked example

### Example 1

Ticket Reconciliation for One Show:

For a 300-seat theatre, Show 1 on Saturday: tickets printed = 300, advance booking = 80, walk-in sold = 185, unsold returned = 35. Total accounted = 80 + 185 + 35 = 300. Revenue = (80 + 185) × ticket price. If cash collected does not match 265 tickets × price, investigate.

### Example 2

Distributor Settlement:

A cinema pays a distributor 40% of net box office receipts. For Week 1, gross receipts = ₹10,00,000; entertainment tax = ₹1,00,000; net = ₹9,00,000; distributor share = ₹3,60,000. The auditor should verify this computation against the distributor agreement and remittance records.

⚠️ Common exam mistakes

Not verifying that free passes are properly authorised — unauthorised free passes are a common source of revenue leakage.
Missing the reconciliation of advance booking tickets against a separate series — advance bookings must be tracked separately.
Ignoring distributor advances — these are often large and may not be properly adjusted against future settlements.
Forgetting that restaurant income in a cinema is audited the same way as a club's F&B — separate audit procedures needed.

Reference:

Now that you've read this — what's next?

Move from understanding → mastery in 3 clicks. Each option below picks up from this lesson's topic.

🔥 Drill 5 Qs on this → ✍️ Adaptive practice →