HOTEL DEPARTMENT OPERATIONAL AUDIT PROGRAM AUDIT STEPS 1.

Review previous audit files and reports to become familiar with areas of concern. 2. As the audit progresses, review material exceptions or discuss with management areas that internal auditing is uncovering during the audit. 3. Conduct an informal pre-exit conference once all audit steps have been completed to ensure that management nows what to expect in the upcoming draft audit report. !. "inali#e all files and draft an audit report for review b$ the chief audit executive. AUDIT OBJECTIVES 1. %etermine that the hotel department and related functions are following compan$ policies and procedures. 2. %etermine that the compan$&s hotel-related assets are properl$ safeguarded and accounted for. AUDIT PROCEDURES 1. Review the hotel-related department&s procedures manuals ' such as the front office, laundr$, revenue audit ' and discuss with the appropriate department personnel to determine if there are an$ areas of concern that the$ might have over the operations. 2. Complete the internal control (uestionnaire. 3. Complete the wor ing papers stipulated in this audit program. AUDIT PROGRAM A. FRONT OFFICE (Room Rates) 1. )btain the most recent month&s financial statements and management reports for hotel operations. *xtract figures for monthl$ average occupanc$, average room rate, and room revenue. )btain explanations for material fluctuations from budget. 2. )btain the updated hotel comparison anal$sis maintained b$ the hotel director and compare hotel performance with competitor and industr$ averages. )btain explanations for material deviations for room rates and what is being charged b$ competitors for the same period. %etermine whether management explanations are reasonable and attach a summar$ to the wor ing paper. 3. +n(uire how room rate maintenance is performed and updated in the front office reservation s$stem, and how overrides are changed, controlled, and deleted. +n summar$ form, prepare the observations and document observed control wea nesses in the wor ing papers. B. FRONT OFFICE (Reser at!o" S#stem) 1. )btain the dail$ reservation report and determine that there is evidence of review b$ the reservation,front office manager of entries e$ed in b$ the

reservation cler s ' in particular the room rates (uoted to customers. 2. -est 1. of the (uoted room rates in the dail$ reservation report to the reservation forms. *nsure the reservation forms or computer entries are signed b$ the reservation cler , or that some other documentation exists. Also, ensure that proper reservation forms are prepared for all reservations made. 3. +n(uire from the credit department how customers& credit limits,credit standings are ta en into account when accepting reservations for hotel rooms. !. Chec the reservation file to ensure that written confirmation is received for travel agent guests ' telex, fax, or e-mail form ' and attached to the reservation form, documenting an$ noncontracted rates extended to the agents,guests. /. Compare a sample of 1. suspended credit limit correspondence memos to the reservation s$stem to ensure that all suspended accounts are updated into the s$stem. C. FRONT OFFICE (Room B!$$!"%) 1. 0elect 1. entries with a 1. room rate from the dail$ list of rooms and trace to the comp form or other comparable document, ensuring it is approved b$ the proper member of management. Reasons for authori#ation should be documented and acceptable in accordance with hotel polic$. 2. -est 1. registration cards to the corresponding occupied room on the room status, e$ report and the dail$ room charges report to ensure that all occupied rooms are billed. 3. 0electe 1. occupied rooms noted on the room status, e$ report and tie to the corresponding registration card. 2ote3 -his test is to ensure that registration exist for rooms that are occupied alread$ to prevent the room being rented twice. !. Review the reasonableness of room rates per the dail$ room charge report and test 1. rates to the corresponding reservation form or standard price list,customer contract for unusual or exceptional rates. D. REVENUE AUDIT (Da!$# A&'!t) 1. 4sing a revenue audit chec list, observe one dail$ hotel audit performed b$ the revenue audit staff. Compare $our observations to their approved, written chec list and document variations in memo form to the wor ing paper. 2. Choose three da$s of dail$ revenue audit pac ets for the hotel revenue audit. )btain vouchers for all revenue ad5ustment transactions ' that da$&s voids, nonguest paid outs, guest paid outs, previous da$ corrections, and refunds ' and trace total voucher amounts to the final revenue detail report to determine if all ad5ustments are supported b$ vouchers. +f vouchers do not balance, document procedures for dail$ balancing. 3. Review vouchers for propriet$, proper completion ' including guest name, room or account number, date, amount, ade(uate explanation, name of preparer, and approval. Refund vouchers and guest paid outs should include the guest signature. 6aid outs should be supported with a receipt. -race 1. percent of the vouchers for each da$ tested to the folio to ensure that the account was affected properl$. !. "or the three da$s tested, trace totals to the general ledger. /. Review tax documentation to determine that tax rates are appropriate for the following areas3 Room service deliver$ charges, ban(uet service

charges, pac age plans, and mandator$ restaurant service charges. 7. "or an$ exceptions prepared b$ revenue audit for the three da$s tested, ensure that management responded properl$. E. REVENUE AUDIT (Co"tra(ts) 1. )btain the contract between the hotel and the pa$ -8 provider. +nclude a cop$ of commission terms and discuss procedures used b$ management to ensure pa$ -8 revenue is recorded on the financial statements. Research and document an$ concerns that arise during this testing. 2. +f the propert$ has an 9on command9 video or other s$stem with a percentage commission due the hotel, review last two months& invoices to determine if the commission received complies with the contract, and the amount remitted was properl$ calculated prior to pa$ment. Research and document an$ concerns that arise during this testing. 3. Review lease,rental agreements, if an$, for hotel space. %etermine that the recorded revenues agree to the terms specified. +nclude copies of applicable lease documents in wor ing papers. F. REVENUE AUDIT (A((o&"ts Re(e! a)$e) 1. Review the current accounts receivable :A,R; aging report. 0elect at least 2/ accounts and determine whether or not all categories of receivables are ade(uatel$ covered. <eavier concentration should be placed on old and unusual items. -he total amount selected for testing should be between 1/ percent and 2. percent of the cit$ ledger. -est for the following3 Agreement to supporting documentation, either on file with the applicable folios, ban(uet chec s, and other related documents, or to online billing. +nitial billing date is timel$, based on chec -out date. Consistent documentation is maintained of collection efforts and approved direct bill authori#ation. 4nusual items are reasonable :e.g., credit balances, returned chec s, s ip accounts, one compan$ with balance in several different categories.;

2. +f material, or if unusual items are noted, test for proper controls, including review of the high balance report and -elechec procedures. 3. -race the total of the aging report to the general ledger and the A,R recap report. !. Review write-offs, and if material, review selected write-offs for ade(uate support, proper collection efforts, proper approval, and reason for write-off. =e alert to consistent causes :e.g. front des personnel failure to follow established hotel policies;. G. CASH a"' CHEC*S 1. )btain the mail chec -register log for the last two-wee period. -race all hotel chec s received to the ban -certified deposit slip and to the respective posting to the general ledger. 2. Review the mail chec register log to ensure3

6roper segregation of duties exists among the emplo$ee who opens the mail and logs the chec s, the person who deposits the items to the ban account, and the person who posts the chec s received to the A,R ledger. Copies of logs are filed chronologicall$ for proper record eeping purposes.

3. 6erform a surprise cash count on two open hotel cashier drawers. +nclude a cop$ of the surprise count sheet with the wor ing papers. +nvestigate material variances. !. Review and count the pett$ cash voucher box to ensure proper balancing. *nsure that appropriate bac up documentation exists in the ban for pett$ cash activit$. H. HOTEL LAUNDR+ 1. 8erif$ that billings from the laundr$ contractor are chec ed to deliver$,service records provided b$ the contractor, and unit prices are agreed to the services agreement with the contractor. *nsure the deliver$,service record is verified b$ hotel staff. 2. -race a sample of laundr$ contractor billings to guest billings for laundr$ services. 3. -race guest billings to the dail$ sales transactions report or similar document, and the guest ledger to ensure that revenue has been captured in the accounts. !. *nsure that 9free of charge9 laundr$ services, if an$, outside of the ordinar$ linen provided to guests, staff, and outside parties :e.g. entertainers; are in compliance with hotel policies and procedures. /. %ocument other observations and concerns regarding the laundr$ operation within the facilit$. I. ADVANCE DEPOSITS AND REFUNDS 1. 0elect one month&s advance deposit account activit$ and obtain a cop$ of the general ledger transactions. 2. -race a bloc of 1. refund pa$ments to accounts pa$able vouchers and verif$ the following3 Refund is supported b$ cop$ of deposit tic et. Refund was for correct amount. Refund was pa$able to the correct pa$ee. Refund is listed on transaction list used to update master deposit listing. Refund is for a reservation cancelled in advance. *ndorsement on cancelled chec agrees with the name of the pa$ee.

3. "or deposits applied at the front des , main cage, vault, or mail receipts, agree a sample of 1. transactions in the most recent month to the general ledger. !. -race the chec to a ban deposit slip. /. )btain a cop$ of the guest folio and verif$ the deposit was applied to the correct guest&s account. 7. Review the general ledger control account for an$ ad5usting 5ournal

entries to the advance deposit account and explain the nature of ad5ustments. >. )btain a cop$ of the finance department&s reconciliation of the advance deposit account and determine that all reconciling and outstanding items are reasonable. ?. %etermine if there are stale items in this account that should be written off. J. HOTEL COMPLIMENTAR+ ITEMS 1. )btain a cop$ of the current master complimentar$ :comp; list reflecting who can approve complimentar$ services. 8erif$ that3 *mplo$ees listed are currentl$ active emplo$ees. Comp privileges authori#ed for the individuals listed were approved b$ senior management. Chec a sample of documentation to validate the emplo$ees& level of authori#ation.

2. 0elect the most recent month of complimentar$ activit$ for detail testing and perform the following3 Review transactions in the comp clearance account. Agree entries to applicable 5ournal entries and indicate purpose of such entries.

3. 0elect one da$&s transaction report and obtain comp charges for the da$. Agree actual comp charges to transaction total. Review each comp folio and verif$ the following3 -hat comp is supported b$ documentation signed b$ an emplo$ee who is authori#ed to comp at that level. -hat charges authori#ed for comp are according to polic$ :i.e., a comp room should not include food and beverages if not authori#ed as such;.

!. "or complimentar$ food and beverage :"@=; charges posted to the complimentar$ master folio at the front des ' the customers& hotel account for the period of their sta$ ' agree the actual restaurant charges to the folio and verif$ that the comp is signed b$ an emplo$ee who is authori#ed to comp at that level. /. )btain a cop$ of the dail$ complimentar$ wor sheet for the date being reviewed and perform the following steps3 Reconcile the total charges shown on the wor sheet to the transaction total and "@= recap totals. *xplain an$ variances or reconciling items. 8erif$ that information shown on the comp wor sheet agrees with the applicable comp folio and are posted into the proper categor$.

7. )btain the month-end comp wor sheet and perform the following steps3 8erif$ computation of total comps, tax ad5ustments, and net comps for the month. -race total to the comp clearing general ledger account. -race tax ad5ustments to related tax accounts.

>. %etermine how comp charges are handled for computing room tax and document procedures in the wor papers3 8erif$ that procedures being followed are in compliance with applicable tax regulations. -est computation of related tax ad5ustments to determine if the method used is reasonable.