1. 1
RISK MANAGEMENT ANALYSIS –A COMPATIBILITY
REVIEW
AN EXCLUSIVE PRESENTATION OF RISK
MANAGEMENT IN HOTELS
THIS PRESENTATION IS MADE BY S.JAYAKUMAR
----MA,MBA, ACS –INTER , DIPLOMA IN HOTEL
AND AIRLINES MANAGEMENT ,BGL,DIPLOMA IN
COMPUTER APPLICATIONS-Telephone
919840091417-email jay7771@gmail.com

2. 2
HOSPITALITY INDUSTRY –An Overview
 Vision –The Tourism Industry Plays a vital role in all Economies ,and many
economies try to drive Tourism as a core sector for its Growth potential ,Thus
we should Enunciate the postulates for an effective Strategy for promoting
tourism , hospitality industry is a dominant feature of Tourism , Main Segments
being Hotel. Airlines ,Misc Transport. Hotel Industry Management should strive
to Endeavour providing the optimum services in terms of Room nights ,Food
and Beverage , Guest entertainment and allied utility Services
 Mission-In our presentation we would focus mainly on the hotels ,the service
line concept of providing guests with Accommodations , Food and Beverage ,
Entertainment, and Other Utility facilitations, as an ultimate satisfaction of the
guest ,to which task to Maintain a Business Plan set to realistic Targets
quantified and qualified , Our Focus would be to provide an insight and define
the Risk Management Process Related to hotel Industry and summarise the
critical phases of hotels Risk Management Analysis

3. 3
 BUSINESS ENTREPRENAURSHIP -Model
 Entrepreneurship-owner
 Business formulation
 Market Research & Project Identification
 Project Report , Feasibility and Design
 Company status –Incorporated-Partnership-objectives and Articles
 ' Capital –Sources and Mobilization
 HOTEL BUSINESS PROCESS
 OPERATIIONAL SUPPORT SERVICES CORPORATE BUSINESS ENCRYPT `
 1 ACCOMODATIONS 1 SALES AND MARKETING 1 BUSINESS PLAN-BRANDING-SOPs-Trip Advisor
 Opportunity Cost Decisions
 2 FOOD and BEVERAGE 2 FINANCE & HR and ADMN 2 KRA’: s /KPI ’s

 2 A KITCHEN 2 A MATERIALS supply chain-Stores 3 ASSET MANAGEMENT
 par stock, physical stock verification B alance sheet Leverage Recon ,Fixed Asset Register
 GAAP-IFRS,AUTHORISATION -ALL
 B STEWARDING B HUMAN RESOURCES 4 PROFIT PLAN –USAH-- Budget GOP’s cash flow
 C COLD STORE AND GEN STORE C SECURITY
 ENTERTAINMENT 5 CONTRACTS ,LEGAL SYSTEMS
 HEALTH CLUB 3 Engineering 6 Risk Management –IT solutions /package system
 SPA 3 a PROJECT
 BOUTIQUE
 4 Transportation 7 Manning Guide –structure, PA,SWOT -WELFARE
 trade union –mgt relations, Organization structure
 DISCO job descriptions, Disciplinary process
 Swimming Pool 5 IT -MIS 8 Tax Planning-SURPLUS –New Project Identification
 Tours –local
 Guest Transport 9 OWNING CO –OPERATING CO.- Contr. obligations
 Diving 10 PASSION AND OWNERSHIP
 Cruise
 Sea sports
 Beach sports
 Cost board
 A HOTEL BUSINESS MDEL—BY JAY

4. 4
Hospitality Risk Analysis
 Risk analysis --A risk analysis involves identifying the most probable threats to an
organization and analyzing the related vulnerabilities of the organization to these
threats.Most businesses depend heavily on technology and automated systems, and
their disruption for even a few days could cause severe financial loss and threaten
survival. The continued operations of an organization depend on management’s
awareness of potential disasters, their ability to develop a plan to minimize disruptions of
mission critical functions, and the capability to recover operations expediently and
successfully. The risk analysis process provides the foundation for the entire recovery
planning effort. Insurance coverages, Marketsurvey
 Crisis management plan for protecting profit
Building an effective relationship with the management company and the owner is
essential to maximise the value of the hotel. The first step is to align the objectives of
both parties and measure performance. Fortunately, both parties want the hotel to
maximise the return on investment. However deciding whether revenue and expense
levels are reasonable and achievable can be a difficult task as various factors affect a
hotel’s ability to generate revenue and manage expenses.
Asset managers should encourage operators to plan beyond the yearly budget and
identify opportunities for generating incremental revenues. The following provides
suggestions on how to create incremental revenue and how to protect cost, therefore
enhancing long-term real estate value.

5. 5
 Profit Protection Plan
The lodging industry is often the first victim of terrorism, war and force of
nature. Every market is vulnerable to crisis and every hotel needs to have a
plan to protect its profit. During those unpredictable periods the revenue
usually declines immediately and the operator needs to act right away to avoid
significant losses. A profit protection plan will provide targeted actions to
shield profit and goes far beyond the regular cost saving. Each action should be
measurable and it should allow the operator taking prompt action to contain
losses generated by the regular hotel operation.
Profit Protection Plan can include the following:
- Produce a budget re-forecast
- Reduce provision as revenue decreases
- Close some floors to save energy
- Close selected F&B outlets and reduce provisions
- Limit outsourcing and maximise use of hotel staff
- Reduction of number of employees
- Encourage multitask employees
- Reduce lower rated travel agents and tour operators
The better prepared the hotel, the better will it be able to respond and
rebound. Once created, the profit protection plan can be updated every year. In
case of actual crisis, the plan will be adapted and modified to fit the situation.
As long as there is a plan in place, the management team can focus on
generating incremental revenue.
Hospitality Risk Analysis-Cont

6. 6
 Incremental Revenues
Now that the marketing plan is in place, every operating department should focus on
generating incremental revenue, which will increase the flow-through of the hotel
towards profit. The following provides a few suggestions on how to improve hotel
revenue:
Rooms department
- Room service menus and spa menus outside guest directory generate more revenues
- Use the guestroom television as an advertising vehicle. The in-house video can cross-
sell and promote your services, amenities, and food & beverage promotions
- Be innovative. Create a children activity menu, in-room promotion, e.g. Pizza night (1
pizza and the movie is free), improve the mini-bar with cards, sun cream, mosquito
repellent
- Consider front-of-house cross-training, implementing incentive programs
- Review amenities packages and operating supplies to reduce costs
- For the travel agents and the tour operators, the hotel should provide sales tools such
as promotional packages offers, e.g. spa, adventure, discovery, activities for kids,
business and MICE
Food & Beverage department
- Evaluate pricing and menu mix at restaurant
- Different promotions every other week to keep the local residents, especially in mixed-
use development (office and residential towers)
- Identify catering goals for the sales staff, brainstorm off-site catering opportunities
- Restaurant’s signage is often overlooked
- If you have a child-friendly resort, there are opportunities to improve the revenue in
F&B outlets: kid menus, small games, table set to draw on
- Cross sale fliers on the table
Hospitality Risk Analysis-Cont

7. 7
 Other departments
- Consider selling parking to non-guests
- Identify whether the fitness centre is good enough to solicit monthly memberships
- Study the possibility of leasing hotel space to a third-party retail tenant
- Ensure that there are defined revenue goals for each employee in the sales
departments
- Review employee’s salary versus revenue goals
- Consider replacing overtime hours with contracted labour
- Appoint employees in each department who specialize in identifying in-house revenue
opportunities
- Several properties can combine orders to increase the volume of items and the
discount
- Review all contracts of operation and maintenance, including elevator and trash
removal, bid each contract out upon renewal
- Consider completing an energy audit to determine opportunities to decrease cost
- Consider insurance umbrella when you have more than one hotel asset
Asset Management
- If the hotel will be renovated during the year, consider renegotiating the contracted
fees and terms of the management contract.
- Secure the owning company position by ensuring all contract terms are respected. The
asset manager should create a management requirement checklist and if the
management company doesn’t respect a requirement (e.g. on time reporting,
reforecast, presentation of the annual proposed budget), it should be notified in writing.
The first objective of asset management is to assist hotel owners or investors to realise
the full value of their hotel assets through a continuous process of value creation and
enhancement. The asset manager should encourage the operators to achieve this by
optimizing operational, financial and capital efficiencies of the hotel with the ultimate
goal of maximizing profits and investment returns for the owner and investor
Hospitality Risk Analysis-Cont

8. 8
The hospitality process Flow
The hospitality Process --
Travel motivation population
Holiday Travel Corporate travel Other –travel Crew
Tour Operators Travel Agents
Airlines
Hotel
Other
Reservations
Yield/.ADR
status
Cost
parameters

9. 9
Business Model – Hotels (Illustrative)
Corporate Governance Business Planning
Mergers & Acquisitions/ Projects Marketing & Sales
OperationalStrategic
Medical Audit
Stakeholder
Perspectives-Strategic
HospitalityService
Industry and
Delivery
Corporate Governance
Accommodations
Revenue Board'
Food and
Beverage
Hospitality
Operational process
Entertainment ,
tours and
other Revenue utilities
Support
process
Sales and
marketing
HR&
AdministrationFinance
KPIs
Support
process
corporate
process
Procurement
supply Chain
Support
Process-cont
Owners risk
KPIs ,KRAs
Engineering,
Assets
Management
Repalcement
Analysis
Equipment,Mach
Replacement
PROJECTS
&LIQUIDITY
Operator Risk
Team building
Write off
,Bad Debts
Signage
Project
planning
SOPs
MANUAL
COMMERCIAL
POLICY
Effective Security
&signage
,IT
HospitalityService
Industry and
Delivery
Legal
compliances
AUDITS PMS
Support
CORPORATE
PROCESS
HospitalityService
Industry and
Delivery
HospitalityService
Industry and
Delivery
Cost Board

10. 10
Business Model – Hotels (Illustrative-Cost Factors )
RAW MATERIAL
Inclusive Power and Fuel
Room s and Amenities –
Housekeeping ,securityCost –
Variable
Perspective
Misc Revenue Management and
Utilities cost
Other cost
Enablers
Operating Systems & IT
Inventory Management
Insurance including TPA
Finance & Accounts
MIS & FR
Administration & Facility
Management
HACCP
Legal & Taxation
Misc. Fixed
Cost
Important
Food and Beverage
Sales and marketing
ENERGY MANAGEMENT
Franchise fee/branding
Capex—FFE
pay roll Related opr cost
pay roll Related fixed cost
Planning ,organising coordination direction control
Audit,
SOP,Manuals,KPI’s,KRA’s,PMS
Liquidity -Cash flow &Funds flowProfit plan derivatives

11. 11
Key Issues noticed in Hotels•
OPERATIONS MANAGEMENT
•
Accommodation control,
•
Revenue leaks ,Fraud ,Discounts,
•
Room occupancy reporting system
•
Profit plan
•
Incremental Revenues
•
Health club Risks-sauna and steam –process failures may lead to reputation loss –SPA treatments –Allergies from
medicines and Discotheque –Break downs , Fitness centre inefficient Machineries may cause business Reputation Loss
•
Branding –A
•
HUMAN RESOURCES-should vacilitate between guest service standards-Occupancy and Costs
•
Training and Change Management-A trainer full time or all department Heads Must have
•
Job descriptions,lack of effective man power utilisations
•
Frauds in payroll , Service charge has been Immense –biometric Attendance payroll system should be made prevalent,
•
Recruitment process , health and safety audits

12. 12
Key Issues noticed in Hotels
--Finance –Supply Chain-Engineering -IT
 FINANCE
 Balance sheet Reconcilitaions ,Night Audit, Budget /forecast to Actuals variance reporting,
Asset management ,Equipment Replacement ,Profit plan protection, Financial Leverages
,Profit and loss(USAH) ,Balance sheet , Break Even ,Cost Board management, property risk
entails an Insurance Plan, expediate Claim s ,Cash and Bank Balances , Credit Card
Management ,cash flow ,budget to Actual variance Analysis ,Balance sheet Ratio, Liquidity
,funds Transfers
 SUPPLY CHAIN-Quality procurement ,contracts, setup of material specifications
LCs and Guarantee terms of credit ,Receiving material ,quotation comparisons
Set up of EOQ, Inventory set up with stock out ,FIFO,ABC ANALYSIS ,physical stock variances
freezer stock stabilisations
 ENGINEERING –Preventive Maintenance scheduling ,Generator , Desalination Plant ,Property
and landscape protection against Fire ,safety compliances,protect gardens against horticulture
damages ,water Damages and impurity of water ,slip trip and fall prevention
 IT—Cyber Liability covered Insurance ,hacking Reservation system,sabotage of the various
computer packages and Telecommunication system –this aspect very prevelant in many hotel
companies which has mitigated service standards and led to loss of Revenue
 SECURITY ,TRANSPORT-Decipher Crimes,enabling and strenthening security systems ,
Transporation loss of fuel , spares , valet parking discomforts

13. 13
Key Issues noticed in Hotels SALES And MARKETING
 Business Plan-should transparent and Result Oriented
 Market Segments should be well defined and Forecasted well
 Product obsolence is one the main risk factor , Hotel management
should initiate drive measures to combat this factor
 Opportunity cost plays a vital role in Modernising and upgrading
facilitations ,its should be treated as deffered cost concept
 All Departmental meetings should stress the factor maintaning
service standard, guest satisfaction, handling Guest complaints on
a war footing ,ensure prompt services in outlets , telephone
courtesies, guest Slogans Like –YES I CAN ,and Guest Is Always
Right –should be portrayed ,hotel fact sheets , Guest stationery
,business center , power supplies ,lift services ,signages .should all
be in its place-the Above factor are adverse risk Factors .

14. 14
Key Issues noticed in Hotels—cont-corporate
CORPORATE ---PRORPERTY RISK –Regular Revaluation of Assets
Loss Of Revenue Analysis ,operating profit ,Interaction valuation and Insurance brokers
Fix et Asset Register with all workings of Depreciation analysis ,replacement of
Machinery and FFE
Premises Liability, Safety codes to be defined to ensure guest safety
Product Liability –To ensure condition in food processing from poison ,enact HACCP
procedures
Branding –refurbishments –FFE-capital Replacements , are a continuous planning
process In corporate budgetary policies, keeping in view of the market Thrust and stifle from
competitors
Hazards –Rodent menace ,cockroach and other menaces which are hazardous in the kitchen ,rooms
and public areas
Pest control contracts
Corporate -Operating ,sales and Marketing planning, financial planning ,material planning ,human
Resources planning ,Engineering Plan, project planning, and other utilities planning ,risk factors are to
be prioritized .
The following factors are highly important in the assessment of Risk Factors
Arson, Electrical Installations ,Fire Protection, House keeping, Security and Alarm systems, Health and
Safety ,control of contractors, water Damage control ,Disaster Recovery
Thus the issue of Monitoring the hotel overview management is the Top Management Role , hotel
companies should Realize the above factors and size Up the situation on a smooth phase of control

15. 15
RISK ANALYSIS –ANALYTICAL TOOLS
 Guest History
 Break even Analysis
 KPIs
 Management Team-Internal Business Processes lacunas
 Management Team & Audit -External Forces: competitors, suppliers,
customers, agents, adviser-
 Management Team ---Identity Theft and Computer Fraud
 Top Management Review --Strategic Risk External Forces:
competitors, suppliers, customers, agents, advisers encourages
companies to promote Ethical Code of Conduct, Anti-Fraud Policies,
Whistle Blowing Companies

16. 16
RISK ANALYSIS –ANALYTICAL TOOLS
 Value based analysis- ROI ,Break Even Analysis
 - Identifying Training needs during the evaluation of the internal
business process
 IT- Analysing the core processes
 Procurement- analysing the core processes in supply chain
management
 Reservation Systems- Revenue Management- from the time a
Reservation check in –Registartion is made to the time the checks
out.
 Operations- an integral analysis of the hotel service experience
 Service Delivery- Level of guest satisfaction
 Sales and Marketing – Evaluating the key performance indicator –
Revenue Drivers
 Trip Advisor &Guest Matrix Benchmarking Exercise

17. 17
RISK ANALYSIS –ANALYTICAL TOOLS-cont
 Train managers to deal effectively with fraud and other risk reporting
procedures.
 Develop strong risk management policies, review existing processes
and identify resources
 Participation
 Provides specialist, practical support when needed.
 Participating as a member of your internal teams in any important
meeting, interview or negotiation in which fraud could be a factor
 Effective design of appropriate company forms to prevent and identify
fraud
 Training managers in effective fraud Mitigating techniques

18. 18

19. 19

20. 20
Organisational structure –hotel ,Hierarchy ,Relationships,communication flow ,job descriptions-
the structure needs to plan ,Organise ,Staff ,Direct ,Coordinate and control

21. 21
Risk Based Internal Audit How we Do
Transaction
Audit
Transaction
Audit
Control
Reviews
Control
Reviews
Process
Reviews
Process
Reviews
Risk
Assessment
Risk
Assessment
Fraud
Mitigation
Fraud
Mitigation
Enterprise Risk
Assessment
Enterprise Risk
Assessment
Increasing Enterprise Risk Focus
NeedofOrganizations
Internal Auditing helps an organization
accomplish its objectives by bringing a
systematic, disciplined approach to evaluate
and improve the effectiveness of risk
management, control and governance
processes.
Source: The Institute of Internal Auditors 1999 (IIA)
Benefits of Risk based Audit
• Traditional audit view value added
techniques
•Risk profile of Businesses
•Internal Controls & Ops Risk reviews
•Cost reductions recommendations
•Review of Fraud Risk Controls

22. 22
INTERNAL AUDIT –FUNCTION –JOB DESCRIPTION
 INTERNAL AUDIT FUNCTION
 Reporting relationship –
 Objectives ---guidelines establish to detect and prevent theft and fraud. Safes and house banks
are audited as well as daily deposit reports for both cash and credit cards. Accounts
Receivables are also audited for correct procedures on billing practices and posting of
payments and adjustments. The accounts payable is reviewed for proper authorization on
disbursements from the manager’s account and/or petty cash. Food and Beverage procedures
for inventory management and promotional accounts are review for proper policy. Gift
Certificates and Trade-Outs are monitored for control procedures. Miscellaneous Revenues are
tracked to ensure collection of all income. All revenue vouchers, receipt vouchers, payment
vouchers, promotion vouchers or any other voucher by way of entertainment or compliment
Aries are checked with serial order control, the vouchers are carried out with accounting
norms and are covered by standard operating procedures
 You would be responsible for checking the accuracies of all the hotel accounts and report every day of all
the discrepancies noted by you , you would be assisted adequately by the staff reporting in these matters
, you would schedule a working report on
 SOPS –You would refer to the standard Operating procedures /Manuals set down by each
 Department Analyse the procedures and if any system or procedure is in - adequate to point out the
anomalies and offer suggestions for better control and accounting practices
 REVENUE JOURNAL –you would go through the debits and credits of the revenue journals
 The Room Bills , Business centre Bills , Telephone Bills , Internet Bills, laundry bills Café central , Chinese
, Banquet , Miscellaneous bills, Room service Bills , Top of the town ,Viet de latin and any other receipt of
income
 1. To ascertain that all billable services are properly reported and accurately
 reflected in the financial statements.
 2. To determine that adjustments to revenue are appropriate and approved

23. 23
INTERNAL AUDIT –FUNCTION –JOB DESCRIPTION
 3. To determine that Company procedures and policies regarding revenue
 recording and reporting are carried out in accordance with current
 requirements.
 4. To ensure that controls and procedures in use are efficient, effective and
 economical.
 5. Obtain vouchers for all revenue adjustment transactions (today’s voids,
 non-guest paid outs, guest paid outs, previous day corrections, and
 refunds)
 .A. Trace total voucher amount to final revenue detail report to determine if all adjustments
are supported by vouchers. If vouchers do not balance, document procedures for daily
balancing.
 B. Review vouchers for propriety, proper completion (guest name, room
 or account number, date, amount, adequate explanation, and name of
 preparer), and approval. Refund vouchers and guest paid outs should
 include guest signature. Paid outs should be supported with a receipt.
 Evaluate volume of vouchers and exceptions noted to be determined
 To ensure that the VAT amounts are charged properly
 To ensure that the SERVICE CHARGE is collected correctly
 Vacant room inspection procedures.-Are all rooms not reporting revenue inspected daily?
 -What report is used for the inspection?
 -Who performs the inspection?-What time is the inspection performed?
 -How is the inspection documented?-How are carryovers and late check-ins treated?
 -What time are discrepancies reported to the front desk?
 Are the front office occupancy report and the housekeeping occupancy reports are tallying

24. 24
INTERNAL AUDIT –FUNCTION –JOB DESCRIPTION-cont
 Telephone revenue. reconciliations to ensure system is reconciled
 to daily revenue reports. Variances of other miscellaneous revenue sources applicable to thehotel such as parking,
 Review tax documentation to determine that tax rates are appropriate
 for the following areas (as applicable):
 Room service charges
 Package plans
 In addition, review Quarterly Tax Return documents and support to
 ensure the property has procedures in place to correctly identify, record
 and track tax-exempt sales (at stand alone properties only). For centralized
 properties, ask during pre-audit discussions if exempt sales are tracked.
 ACCOUNTS RECEIVABLE
 Audit Objectives
 1.To determine the accounts receivable balance as stated on the balance
 sheet is properly supported and that the supporting accounts receivable
 balances are bonafide and collectible.
 2. To ensure controls and procedures in use are efficient, effective and economical.
 2. Review A/R ageing:
 · Agreement to supporting documentation. Either file with all applicable folios, banquet checks, etc., or ability to review all billing items on-line.
 · Initial billing date timely, based on check-out date.
 · Consistent documentation of collection efforts.
 · Approved direct bill authorization.
 separation of duties problem exists, trace payments from the mail check
 log, to posting reports, to the validated deposit slips.
 B. Review for unusual items (i.e. credit balances, returned checks, skip
 accounts, one company with balance in several different categories).

25. 25
INTERNAL AUDIT –FUNCTION –JOB DESCRIPTION-cont
 If material and unusual items are noted, test to determine if inadequacies in the control environment exist (e.g., review of the high balance
report,
 C. Trace aging total to the General Ledger and to A/R recap.
 3. Obtain a current detail list of advanced deposits sorted by arrival date.
 Review list to determine if deposits are properly maintained (arrival date
 listed and not past due). Be aware that debits in this ledger may indicate procedural deficiencies.
 General guidelines: deposits over one month past due should have
 been refunded or otherwise resolved. Perform testing as necessary
 4. Determine if Corporate guest vouchers specific gift vouchers
 are Issued If so, in memo form, perform the following by
 observation:
 · Bulk storage of vouchers are restricted.
 · Vouchers are pre-numbered.
 · Control log is used.
 .
 5. Obtain a current listing of guest ledger account balances. Review detail support on-line for unusual items and high balances to determine if
non current items or unbilled charges exist.
 The guest ledger protel folios of 7000 ,8000, 9000, are all dummy folios these folios do not have related room numbers , the folios are used for
transfer of folio which are kept pending , dot pos payments are posted and group travel on side trips are kept on these folios , these folios
should be monitored and check outs made at reasonable periods , reason for pending should be queried
 To Determine that all accounts are transferred to city ledger or otherwise settled within 5 business days of function end or check out. The
hotels may know these accounts as “Checked out with a balance”, “House Accounts”, “O Status accounts”, “H Status accounts” or other
variations.
 Some systems will automatically transfer accounts to the city ledger, other systems may “hold” the account on the guest ledger, pending an
approved city ledger account number.
 6. Review write-offs. If material, review selected write-offs for adequate
 support, proper collection efforts, proper approval (per approval matrix
 and management contract), and reason for write-off. Be alert to consistent causes (e.g., front desk personnel failure to follow established hotel
policies).

26. 26
` INTERNAL AUDIT –FUNCTION –JOB DESCRIPTION-cont
 7. Credit Card Chargebacks:
 :
 -Ensure that no outstanding chargebacks remain as a reconciling itemon the bank reconciliation .
 -Ensure that chargebacks are posted to the guest or city ledger. The amount should be adjusted against revenue. For some
accounts, an A/R account may be set up for further collection attempts.-Ensure that all inquiries and chargebacks are responded to
timely.

 -Document procedures, determine:
 Account reconciled to the G/L monthly.
 Chargeback’s are valid/supported.
 Invalid chargebacks collected through A/R.
 -credit card inquiries were responded to by the due date to prevent
 Automatic chargebacks.
 Inspect credit card approvals slip , the receptionist may falter in accepting credit card with zero balance ,
 Check whether the credit cards have been accepted by banks , and the amount credited ,
 Review the commissions on credit card charged by the credit card type like the VISA, master American express etc
 Whether sales agreements are properly drafted, whether the sales agreements have the effective dates and the expiry dates
 Whether they have the following aspects covered in the sales agreements
 Mode of payments
 Deposit
 Cancellation charges and retention
 Guarantees and LCS
 Penalty on interest charges
 Credit days and credit limits
 Time of invoicing

27. 27
INTERNAL AUDIT –FUNCTION –JOB DESCRIPTION-cont
 CASH
 Audit Objectives
 1.To ensure accountability exists for cash and cash equivalents received by the hotel and such accountability is properly
maintained.
 2. To ensure controls and procedures in use are efficient, effective and economical.
 3 To ensure that the post safe procedures are followed effectively
 4. Obtain Deposit Witness Logs :
 · Signature of cashiers
 · Signature of witness to drops
 · Signature of person removing envelopes
 · Signature of witness to the removal of envelopes
 · Agreement of the number of envelopes removed and number dropped
 · Agreement of total deposit to certified deposit slip and final reports
 5 .Monitor the daily receipts and payments by the General Cashier
 Make a bank log book entry of the various bank accounts WPH –is operating, the accounts can be Current Accounts Overdraft
Accounts, Foreign currency account or any other account type
 Receipts
 Cash in hand account –the addition of cash to the previous days balance
 Check the daily receipts –numbers in serial order
 Foreign currency collections
 Direct Bank transfer affected by parties
 Any receipts transferred to bank
 Check the transactions in the cash and bank book is accurately recorded
 .check whether the daily collections from protel payments are posted into the receipts
 Note down discrepancies and inform the financial controller for management reporting discrepancy notes should be written and
sent by email

28. 28
INTERNAL AUDIT –FUNCTION –JOB
DESCRIPTION-cont
 Payments Scrutinize all payments
 Check whether the payments have adequate documentation
 Payments are in serial numbers ,Purchase orders are attached with the payment Bills together with
purchase requisition and budget code
 Check whether the bill amounts are rightly debited and debited to the right expenses
 Check with payments debits with the budgeted expenses
 Check with the Expenses whether they are debited to operating expenses, fixed expenses or capital
expenses coded under the uniform system of accounting
 Check whether all documents are paid as per as per the SOPS
 And contracts ,Check the bank reconciliations are prepared for all the bank accounts in the cash book
with the bank book
 BALANCE SHEET ACCOUNT RECONCILIATIONS
 1. To ascertain Company procedures and policies regarding the processing and maintenance of Balance
Sheet Account Reconciliations are carried
 2. To determine Bank Account Reconciliations are supported
 3. To ensure controls and procedures in use are efficient, effective and economical.
 1. Determine that balance sheet and bank account reconciliations have been completed and proper
support documentation is attached.
 2. Determine that support documentation traced and agreed to the Trial Balance.
 3. Determine that reconciliations have been reviewed and
 approval is noted on the reconciliation.

29. 29
INTERNAL AUDIT –FUNCTION –JOB DESCRIPTION-cont
 ACCOUNTS PAYABLE
 1. To ascertain Company procedures and policies regarding the processing and maintenance of accounts payable are carried out in accordance with current
requirements.
 2. To determine vendor invoices and petty cash reimbursements are timely approved and processed for payment.
 3. To ensure controls and procedures in use are efficient, effective and economical.
 From the Accounts Payable Aging, review for outstanding invoice dates greater than 60 days old. Discuss exceptions with A/P employee and/or Controller to
determine if reasoning is valid – i.e. disputed invoice.
 Approved Purchase orders were attached if applicable
 Use tax – if applicable – was accrued
 Check the VAT is accounted for the purchases ,Check all supplier contracts for their validity
 5. Discuss significant observations with the General Manager and prepare
 .
 PAYROLL
 Check the Attendances are properly marked from the time cards
 Check the employee records are maintained
 Check the payroll is properly computed
 Check the appointment orders and employment contracts
 Check provisions for leave etc are properly provided for
 FOOD AND BEVERAGE REVENUE CYCLE
 Audit Objectives
 1. To ascertain that:
 A. All F&B revenues are properly reported and accurately state.
 B. Adjustments to revenue are appropriate and authorized.
 C. Company procedures and policies regarding the recording and
 reporting of revenue are carried out in accordance with existing
 requirements.
 D. Controls and procedures in use are efficient, effective and economical.
 · Checks are presented to guests after the order has been recorded in the register and prior to payment.
 · Room key or credit card is obtained from guests running a tab
 · Portion control is utilized
 .

30. 30
INTERNAL AUDIT –FUNCTION –JOB DESCRIPTION-cont
 3. If a buffet is offered and volume of business is significant, document control procedures and evaluate for adequacy.
 The pre-check feature of the cash register is not useful as a control over buffet revenue. Instead, mitigating controls
are necessary and should be tested accordingly.
 · Guest checks are controlled by the Host or Cashier as opposed to
 Servers.
 · The number of covers and table number is recorded on the guest
 check prior to seating guests.
 · A control log is used to track usage of checks, corresponding table
 number and number of covers per check.
 · Guest checks are settled by the Host/Cashier.
 Perform testing as necessary. Contact In-Charge for assistance.
 B. Discuss management’s procedures for verifying all potential buffet revenue was collected. (If Buffet revenue is
recorded as a separate category on the final register reports, ensure management verifies buffet revenue based on
covers per the control log). Include copies of control log and final register reports in w/ps.
 4. Observe and document the security of POS manager's keys for processing voids. (i.e., key is not left in register,
kept in drawer at register, etc.). If
 A. Trace the void total per the final reports to the actual void checks.
 These should be included in the Manager’s packet for each day, and should have evidence of management review.
 B. Review void tickets to ensure voids are adequately explained.
 5. Discuss procedures for posting F&B revenue per the final register reports

31. 31
INTERNAL AUDIT –FUNCTION –JOB DESCRIPTION-cont
 to the Daily Final Report. Select two days’ final register reports, F&Bworksheets and Daily Final Reports and perform
the following:Trace food and beverage revenues from the final register through the
 worksheet to the Final Daily Report. Investigate material differences.
 Expand testing as deemed warranted. Include copies of all work in wps.
 6. Discuss procedures for posting guest room charges to the PMS.
 The restaurant system may or may not interface with the PMS.
 Test as necessary.7. Review significant observations with the General Manager and prepare
 .
 FOOD AND BEVERAGE INVENTORY CYCLE
 Audit Objectives
 1. To ascertain the internal controls surrounding the recording, reporting and maintenance of inventories are adequate
to provide reasonable assurance against the perpetration and concealment of irregularities.
 2. To determine that Company procedures and policies regarding the
 recording, reporting, and maintenance of inventories are carried out
 in accordance with existing requirements.
 3. To ensure that controls and procedures in use are efficient, effective
 and economical.
 4. To determine that the receipt and disposition of inventories is
 accurately and properly reported.
 . A. Tour the kitchen area, receiving docks, and all storerooms. Document
 results.· Be alert to general conditions, excess quantities, obsolete items, etc.
 · Orders are pre-checked prior to preparation.· Ensure proper security over receiving dock, kitchen exits, storage
 areas and garbage area.· List all exits from the kitchen and their relationship to outside exits.

32. 32
INTERNAL AUDIT –FUNCTION –JOB DESCRIPTION-cont
 · Ensure external building exits directly from or near the kitchen are
 locked at all times or controlled with alarm systems. · Evaluate results of tour in relation to
ICQ.
 B. Document key controls over F&B storage areas and evaluate for
 adequacy. For each storage area determine:· When they are opened/unlocked
 · How many keys and who has possession· How keys are controlled and secured at the end of
the day
 · Bottles are marked with an identification stamp or sticker.
 3. Review inventory sheets for reasonableness of quantity and pricing.Relate quantities to
tour of storeroom and investigate any unusualquantities. Recalculate a sample of item cost
exceptions (or obtain diskswith inventories and review formulas). Trace any unusual pricing
to the
 most recent invoices. Note who performs/documents inventory. (non-F&B employee
involvement required). If exceptions are noted expand testing as warranted.
 4. Test par liquor records by performing an actual count. Include copies of
 par listing in workpapers. Sample size should be 10 items. Complete the
 Select ten items from the Par list and locate bottles in the bar. Also,
 select ten items from the bar and trace to the Par list. Expand testing
 as necessary.
 Banquets
 5. Select two banquets from the Banquet Function Book and perform
 the following: (Include two cash bar functions)A. Verify a banquet/catering contract is on file
and signed by the customerB. Trace each function to the posted banquet guest check. Include
check
 copies in wps.
 C. Ensure each function’s revenue was posted to the PMS. If more than
 one function took place on test days, trace total revenue from the
 banquet recap to the Final Daily Report. Include copies in wps

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INTERNAL AUDIT –FUNCTION –JOB DESCRIPTION-cont
 6. Evaluate cash bar procedures (using two from 5. above). Verify that sales
 potential calculations are completed.
 7. Review significant observations with the financial controller and prepare a report
 BALANCE SHEET
 Assets and liabilities
 All schedules prepared are checked with the each item in the balance sheet
 Verify all fixed assets and register are managed and under control of the General ledger
 To check all the cash floats are in order
 To check whether the Vietnamese laws are applicable in the preparation of the Profit and Loss A/c
and Balance sheet
 To check if all the ratios are compatible
 To verify all documents of reports such as daily revenue reports cost board reports budget variances
reporting daily PL Monthly PL and Balance sheet
 To check and verify all reports generated from Protel , Dot Pos and Lemon 3 Or any other packages
operative such as food cost alternative back office system and payroll system
 To analyze all system of control such as special promotion tickets etc
 To analyze lost and Found
 To analyze gate passes inwards and outwards
 Board resolutions minutes of the directors meetings –company secretarial practices
 To perform any other duties assigned to you

34. 34
Computerisation
 Risk management Analysis is proactive and more comprehensive when the hotel
Management systems are computerised , The PMS elucidates the theory of absolute
control with standard deviation errors and gets more effective and efficient with
Training the USERS , and Tracking all evasive happening with a strict Surviellance by
the supervisors on the Actual Users ,the cost of procuring the packages and
implementing them are an Opportunity Cost which can be recovered in a couple of years
.some of the computer packages are
 1 Xn.POS.protel and Sun systems EAM check system, 2a DATA –PRO Gl, ADACO
Inventory,ABACUS-Pos,RDP-Front End 2 Intap, Infront, Inmat, Inact pay roll 3
Prologic back office and front office 4 Micros and Fidelio 5 orion 6 Agpac 7 micro soft
project 8 Daceasy /IDS 9 CPM /PERT10 Micro soft –Excel, word, power point,equipment
Control panels,Telecommunication systems ,Attendance Bio Metric System etc
 A very Important Feature Of computerization is it provides Feed ward Control nexus to
Feed Back Control
 Computerisation is Fraud prone , but the systems Managers with Department Head
should customise the Levels Of Users , and the internal Audit system should monitor the
Reports with Physical verifications and Reconciliation , It should be pointed that the
computers USERs are prone to input Errors ,hence supervision of the Input and Out put
shoud be intensive and Devoid of Errors, external Sabotage should be visioned and
curtailed with an Auto Locking and an Access Password system
 The Reporting System enables the Reading Of KPIs-any Digression could be unearthed
and checked ,Thus a MIS reports become very objective .a very Resourceful ERP system
governs the growth of companies

35. 35
Internal Audit Universe
Internal Audit may be performed in the following domains for HOTELS
iTh
e
Hotel Governance
ii Hospitality Facilitations
iii Operations Support Audit
iv Supply Chain process –Inventories
v Finance & Accounts
vi
Compliance Management, Human
Resources Utilisations
Ensuring management’s vision , business objectives are incorporated in
the governing principles of the companies articles and objectives
Ensuring SOPs are in place and computer package system are
customized to Hierarchy of levels of Supervision
Ensuring robust business processes to support effective and efficient
operation of units.
To Ensure quality Material is procured at Optimum prices ,Material are
stocked , stock sheets are monitored physically as well as thru the
inventory Package , Reconciliations are performed and Justified
Ensuring processes and controls for accurate and effective financial
Planning accounting and reporting.
Ensuring processes to help units and HO comply with internal policy and
procedures, legal requirements, companies, IT, Act , and other
requirements. There is a proper utilisation of Human Resources ,
equitable wage structure ,progressive human resources Management
with performance Appraisals and SWOT analysis
Major focus area Objective
The Manning Guide

36. 36
Internal Audit methodology for Hotels
Audit planning Audit execution Reporting
• Gaining detailed understanding of your
organisation.
• Identification of key business processes
supporting GUEST service.
• Importance mapping of business processes.
• Identification of business risks at unit and
organisation wide level.
• Organising workshops at unit and HO level to
discuss key business processes and risk rating to
attain common understanding.
• Identification of operational and FUNCTIONAL
processes to be audited (audit wish list).
• Discussion with unit heads and HO to prioritise
audits.
• Final internal audit plan
• Engagement letters
• Detailed scoping for each audit in discussion with
process leaders, unit heads, FCs and HO to identify
key focus areas.
• Conducting detailed process walkthroughs,
documentation , risk & controls identification and
testing.
• Continuous discussion with management at unit
and HO.
• Identification of issues, risks, implications,
recommendations and discussion with process
leaders.
• Audit issue/ process gap impact analysis on clinical
and support processes.
• Benchmarking of processes with leading hospital
practices.
• Engagement scoping document and timelines
• Regular audit updates
• Audit workpapers and audit issues
• Providing detailed audit issues and supporting evidence
(including discussions) to process leaders at unit and
management for management comments.
• Organising audit closure workshop at unit with process
leaders, unit head and medical director to discuss audit
issues, rating and recommendations and attain common
understanding.
• Submit final audit report to unit, HO and audit committee.
• Formation of recommendations implementation roadmap in
consultation with unit and HO.
• Summary reporting to audit committee and presentation.
• Obtain feedback.• Findings and recommendations report for management
comments
• Final report for management and audit committee
• Practical recommendations and implementation roadmap
• Audit committee report and presentation
• Team of professionals with extensive experience in healthcare audits.
• Continuous project reviews by partners and directors of the firm to ensure quality and client satisfaction.
• Team of professionals with extensive experience in healthcare audits.
• Continuous project reviews by partners and directors of the firm to ensure quality and client satisfaction.

37. 37
Other factors to be considered for Scoping
 .Competitor and Industry growth awareness
 Business Objectives – Mission and Vision to be Reviewed every year of Business Plan ,Incorporated
companies will have to work within its declared legal Parameters , amendments must be forthcoming in AGMS
 Hotel a – for new hotels , key focus is effective implementation of SOP’s, clarity in roles & responsibilities, service
delivery monitoring. Stable/ Mature hotels can focus more on operational excellence, introducing industry best
practices., A changed management strategy and Training of Staff should be the focus for intensive productive
measures to ensure and enable the staff including the Management team –A training Adaptability
For a changed management strategy to enable sustainable occupancy Ratios in Rooms , and Guest average
checks at the outlets
 Integrated Compliance Risk Management –a Well Accepted operating system ,complied with an intensive
Reconciliation of KPI, Balance Sheet Reconciliations , Business plan Thrust of KRAs , An Integrated Internal
Audit system , a Realistic GOP,NOP and Cash Flow achievements with a month and year analysis ,a Budget to
Actual Variance Analysis an Intensive material Receiving systemand an Inventory process , Fixed asset
Verifications , fire Fighting Training , Natural Calamity Training ,are pertinent Risk Factors correctives , Lack Of a
SIGNAGE –Floor is wet ,has costed a hotel around 300000 usd as a guest Liability Plus court Costs ,A Well
Defined Manning Guide ,Equipment Replacement analysis ,Insurance coverages ,TAX Incidences and payments
are all well conceived Risk Management Process
 Review The Top Management should Review the systems and SOPS , as also create a MANUAL for an
effective implementation
 Fraud vulnerabilities should be reviewed while ascertaining IA scope
 Maturity of IT/ ERP system is crucial factor for scoping-Selection and implementation of an ERP system
standard ERP integrated packages are Micros Fidelio, Prologic ,sun system protel dot pos,Ezee,
Infront Inact –Data pro, RDP ,ADACO,abacus etc

38. 38
ROAD MAP
 Todays Management are suferring from stabilising their bottom lines ,any Project
Feasabilty Rules the ordinance of achieving planned profit Margin and derivative Cash
flows
 Risks are always a strong Vision On Project successes , To Mitigate the Risk is today the
oradained factor of modern business
 The Technology contribution to Business Decisions are the 21 st century inheritance ,
thus a prudent entreprenaur would ensure his business is protected and there is an
inbuilt mechanism in assuring his companys growth with a distinctive cash flow
,Protection of company’s Assets ,Margins ,and a Vertical Take Off
 Risk Management focuses on helping eliminate and/or reduce risk that goes beyond
traditional solutions to help maximize cash flow and minimize fixed costs. By addressing
all factors which drive cost, we create significant opportunities for meaningful savings
over time. Thus one could Analyse :
 Facilities and operations ,Processes, policies, and procedures
 Business interruption,Contracts and documents
 Claims ,Legislation/regulation
 Environmental
 Our experience and personal knowledge of the hospitality industry translate to more
effective, cost-efficient solutions, products, and services for you and your company

39. 39
Road Map Continiued
 All organisations require integrated business processes to improve operational
and strategic planning and reduce the impact of unexpected events and
compliance breachesRisk is traditionally seen as any threat to an
organisation’s success. Risk management is the process of recognising risk
and developing methods to both minimise and manage risk.
 Effective risk management is a powerful tool and can be a source of
continuous operational improvement. An integrated, efficient risk management
system enables organisations to become more anticipatory and operate more
strategically.
Thus Risk Management is a concomitant tool to Business Plan formation, The
Inevitable success of a Business Plan Is the management excellence of the
Team planning , Financial control , Internal audit ---plays a vital role , and the
Information Technology Through customizations of Computer Packages , the
Business Plan is the immediate success of any Ongoing organistaion where
surplus is the NORM
 Thanks a document Created By S.JAYAKUMAR