## Audit of Hospitals

### 1. Register of Patients

Verify bills for a selected period against the patients' attendance record.
Confirm bills were correctly prepared and issued to all recoverable patients per hospital rules.

### 2. Collection of Cash

Check cash collections in the Cash Book against receipts, counterfoils, copies of patient bills, dividend and interest warrants, rent bill copies, etc.

### 3. Income from Investments, Rent, etc.

Cross-reference the Property and Investment Register to verify all rental income, dividends, and interest on securities have actually been collected.

### 4. Legacies and Donations

Ascertain that legacies and donations received for a specific purpose have been applied in the agreed manner.

### 5. Reconciliation of Subscriptions

Trace all collections of subscriptions and donations from the Cash Book to the respective registers.

### 6. Authorisation and Sanctions

Vouch all purchases and expenses; verify capital expenditure was incurred only with the prior sanction of Trustees or the Managing Committee.

### 7. Grants and TDS

Verify government or local authority grants have been duly accounted for.
Confirm that refunds of TDS on investment income have been claimed.

### 8. Budgets

Compare totals of various income and expenditure items against budgeted amounts.
Report significant variations to Trustees or Managing Committee.

### 9. Internal Check — Stores

Examine the internal check system for receipt and issue of stores: medicines, linen, apparatus, clothing, instruments.
Ensure purchases are properly recorded in the Inventory Register and issues are made only against proper authorisation.

### 10. Depreciation

Verify depreciation has been written off on all assets at appropriate rates.

### 11. Registers

Inspect bonds, share scrips, and title deeds of properties; compare particulars with Property and Investment Registers.

### 12. Inventories

Obtain inventories of stocks and stores as at year-end.
Physically verify a percentage of items; compare total values with respective ledger balances.

Worked example

### Example 1

Example: The hospital received a donation of ₹5 lakhs specifically for constructing a new ward. During audit, you find this amount was used for general repairs. What is the auditor's responsibility?

Answer: This is a misappropriation of a purpose-specific donation. The auditor must report that the donation was not applied per the agreed purpose. It should be flagged to the Trustees/Managing Committee and disclosed appropriately in the audit report.

### Example 2

Example: During your audit of a hospital, you notice that several medicines issued from the pharmacy have no corresponding authorisation slips. What should you do?

Answer: This indicates a weakness in the internal check system. The auditor should report that issues from stores are being made without proper authorisation, which is a significant internal control deficiency. A detailed review of such transactions should be done to assess whether there is misappropriation.

⚠️ Common exam mistakes

Not cross-checking the Inventory Register for medicines and stores — hospitals are high-risk for pilferage of medicines.
Overlooking TDS refund claims on investment income — hospitals (if registered charitable) are generally exempt and must claim refunds.
Failing to verify purpose-specific donations separately — these cannot be used for general purposes.
Missing depreciation review — hospital equipment depreciates rapidly and incorrect rates distort financial statements.

Reference:

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