## Audit of Hospitals

### Key Audit Areas

#### Patient Records & Revenue

Verify Register of Patients — cross-check admissions and discharges against billing.
Trace collection of cash from patients — reconcile with ward registers and billing department.
Reconciliation of subscriptions (for subscription-based or insurance-covered services).

#### Grants, Donations & Legacies

Vouch legacies and donations with correspondence, board resolutions and receipt records.
Verify grants received from government/other bodies — check grant letters and conditions attached.
Check TDS deducted where applicable on payments and verify compliance.

#### Financial Controls

Review budgets — compare actuals vs. budget and obtain explanations for significant variances.
Verify income from investments against the investment register.
Assess internal checks — segregation of duties between billing, collection, and recording.

#### Assets & Depreciation

Maintain and verify fixed asset registers — especially medical equipment which depreciates rapidly.
Verify depreciation calculations and ensure appropriate rates for medical equipment, furniture, and building.

#### Inventories

Verify medicines and consumables inventory — physical count reconciled with stock records.
Check valuation and ensure expired medicines are written off.

#### Management Representation

Obtain a management representation letter and certificate for key items including contingent liabilities, litigations, and post-balance sheet events.

Worked example

### Example 1

Patient Register Reconciliation:

The auditor notes 1,200 patient admissions per the register but only 1,150 patient bills raised. The 50-patient gap needs explanation — were they charity patients (should be documented), insurance-covered (check claims), or does it indicate billing suppression?

### Example 2

Grant Compliance:

A hospital receives a ₹50 lakh government grant specifically for a new dialysis unit. The auditor must verify (a) grant agreement conditions, (b) that funds were used only for dialysis unit, (c) utilisation certificate submitted to the granting authority.

⚠️ Common exam mistakes

Not reconciling patient register entries against billings — the gap between admissions and bills raised is the primary revenue audit risk.
Overlooking TDS obligations on payments to doctors, contractors, and service providers.
Missing expired/obsolete medicines during inventory verification — failure to write these off overstates assets.
Not obtaining a management representation certificate — especially important for hospitals given potential litigation and contingent liabilities.

Reference:

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