## Audit of Hotels

Hotel audits require focus across four major areas:

### 1. Internal Controls

Pilferage controls: Proper checks to prevent theft of food, beverages, and supplies.
KOT (Kitchen Order Tickets): Verify that KOTs are serially numbered, properly accounted, and matched against billing.
Taxes: Ensure GST and other applicable taxes are correctly charged, collected, and deposited.

### 2. Room Sales & Hall Booking

Verify the Guest Register: Check occupancy records against revenue billed.
Hall bookings: Verify advance receipts, booking register, and final billing.
Reconcile room revenue with records of check-ins/check-outs.

### 3. Inventories – Food & Beverages

Hotels carry large inventories of perishable and non-perishable items.
Conduct physical count and reconcile with stock records.
Verify valuation method (FIFO typically) and check for wastage/spoilage write-offs.

### 4. Fixed Assets

Distinguish revenue expenditure (repairs/maintenance) from capital expenditure (additions/improvements).
Verify depreciation rates and methods applied to hotel assets (furniture, fixtures, equipment).

### 5. Travel Agents & Shops (Commission Income)

Verify money recovery as per credit terms agreed with travel agents.
Check commission calculations — ensure commission paid is per the agreed rate and supported by statements.

### 6. Casual Labour

Hotels employ significant casual/seasonal staff — verify labour records and wage registers.
Check that deductions (PF, ESI where applicable) and payments are properly documented.

Worked example

### Example 1

KOT Reconciliation:

A hotel issues 500 KOTs in a week. The auditor should match each KOT to a corresponding bill raised to the guest. If KOT #347 has no corresponding bill, it signals either a free meal (needs authorisation) or pilferage — both requiring investigation.

### Example 2

Revenue vs. Capital — Hotel Example:

Replacing a broken window pane = revenue expenditure (repair/maintenance). Installing a new swimming pool = capital expenditure. Incorrectly capitalising repair costs inflates fixed assets and understates expenses.

⚠️ Common exam mistakes

Not checking KOTs against final bills — KOT reconciliation is the primary internal control test for F&B revenue.
Overlooking casual labour records — hotels use significant seasonal staff whose wages may be manipulated.
Treating commission paid to travel agents as a routine expense without verifying the underlying agreements.
Missing physical stock counts for food and beverages — large inventory with high pilferage risk.

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 →