In this difficult business climate, the hospitality industry has evolved as one of the most critical determinants of service sector recovery in the UAE. It is not only an important source of foreign income for the country, but it also generates a lot of jobs. Businesses all over the world have had to take a pause and reconsider their strategy in order to react to the new reality caused due to the emergence of the COVID 19 pandemic. Industries that rely largely on travel and human connection have been struck the hardest, and the hospitality industry has been put under severe strain as a result of the dramatic decline in personal and business travel.

1. Internal Audit in
Hospitality Industry
UAE
www.hlbhamt.com

2. In this difficult business climate, the hospitality industry has evolved as one of the most
critical determinants of service sector recovery in the UAE. It is not only an important
source of foreign income for the country, but it also generates a lot of jobs. Businesses all
over the world have had to take a pause and reconsider their strategy in order to react to
the new reality caused due to the emergence of the COVID 19 pandemic. Industries that
rely largely on travel and human connection have been struck the hardest, and the
hospitality industry has been put under severe strain as a result of the dramatic decline in
personal and business travel.

3. HLB HAMT’s Certified internal auditors in UAE, which is equipped with deep subject
matter expertise, with a thorough grasp of procedures, can play a crucial role in this
demanding business climate. Internal auditors can help businesses in the hospitality
industry ensure that goals are accomplished, risks are adequately handled, and finances
are handled wisely.

4. Key Risks in Hospitality Industry
The amount of risks that hospitality businesses must cope with is mounting. Hotels must
contend with a number of potentially detrimental risks in this industry, especially as they
manage an inflow of both tourist and business guests.
General Internal Controls
Internal control risks have an effect on the overall performance and efficiency
of internal controls and, consequently, on the company’s ability to fulfil its
goals. Certain risks that need to be addressed are the absence of properly
specified qualification standards with flaws in the division of responsibilities;
insufficient standard operating procedures in different departments also
have a big impact. A risk analysis that is sufficiently thorough and completed
on a regular basis should influence internal control systems.

5. Revenue Recognition
One of an entity’s most important components is its revenue recognition
criteria. It is an important performance indicator in the hospitality industry,
and it is regularly evaluated by many stakeholders. Internal controls that are
weaker, such as income from business centres, hotel rates, restaurants,
barter arrangements, deviations from the discount approval process, and
complementary processes, all add risk to revenue recognition.

6. F&B Pricing
The Food & Beverage (F&B) sector is the largest in the hospitality industry,
and it consists of facilities that offer food, snacks, and drinks for immediate
consumption, either on or off the premises. If you’re not cautious with F&B
price concerns including food costs deviations, events & promotions, and
recipe quantity correctness, your firm might be affected badly.

7. Inventory procedures
In the hospitality industry, inventory control is critical for maintaining
accurate accounting records and eliminating fraud. Proper inventory
management processes aid in the production of accurate data and allow
businesses to order the appropriate amount of inventory. While the primary
goal of managing inventory is to reduce loss, hospitality businesses are also
expected to maintain compliance.

8. Fixed Asset
The risk component of fixed assets is compounded by the lack of fixed asset
registries, as well as insufficient asset movement regulations and gaps in
asset warranty tracking. Any business must keep a record of fixed assets
throughout their existence. A company with a high number of fixed assets
must identify, monitor, record, and reconcile its assets, which is critical for
asset management.

9. Finance
Improper tracking of cash management and control practices, absence of an
evaluation of daily purchases/validation of vendor comparative prices,
slowdowns or factual errors in bank reconciliation statements, delays in
books of accounts finalization, and insufficiency of backup documentation
and many more are all finance-related issues that need to be addressed.

10. HR / Payroll
Managing HR/payroll activities in any company is a difficult process that
necessitates a significant commitment of time and money. Companies can
get into difficulties if they are not managed by qualified experts because of
hazards including poor controls in employee management, inappropriate
practices for employee entitlements, and gaps in recruiting processes and
procedures for promotions and salary calculation.

11. IT Systems
The hospitality industry is becoming more vulnerable to cyber-attacks because it
handles a lot of personal and financial information. The Internal Auditor’s role is to
offer assurance and verify that proper controls are in place to manage major risks
such as inadequacy of IT systems, poor access controls, and loopholes in
workflows, procedures and controls relevant to systems such as
● POS & PMS systems
● Finance and Accounting systems
● Payroll
● Central Reservation systems

12. Procurement​
Strategic procurement is an important aspect of the hospitality sector for any
organisation that wants to stay profitable. A well-developed procurement
process immediately converts into enhanced company performance by
focusing on eliminating risks such as a lack of control over price comparisons
and purchase lead times, loopholes in purchase order processing, vendor
selection, periodic monitoring, and agreements with third parties.

13. Internal Audit in Hotel Industry:
Conclusion
Implementing the correct actions to reduce the possible occurrence of these risks is a
necessary part of a successful risk management approach in UAE. Risk mitigation is the
first element in securing a profitable business, and risk assessments must be performed
on a regular basis to prevent dangers that may arise.

14. The audit team will have to understand about the business through managerial inquiries,
analysis tools, monitoring, and examination as part of the risk and performance
assessment procedures.
The audit functions are evolving and are on the verge of digital change, and many
businesses will have to adjust to the new environment faster than other sectors. More
analysis may be used to facilitate remote auditing, resulting in a better and more
productive audit with enhanced customer satisfaction.

15. HLB HAMT’s team has extensive experience in dealing with the hospitality sector and has
worked across multiple types of hotels, F&B outlets, and other sectors that are closely
related to the hospitality industry. We understand industry practices, the IT environment,
control requirements, and efficiency aspects, as well as the need to maintain a balance
between controls and guest experience.

16. Contact Us
HLB HAMT
Level 18, City Tower-2,
Sheikh Zayed Road
PO Box 32665
Dubai – United Arab Emirates.
Tel: +971 4 327 7775
E-mail: dubai@hlbhamt.com
www.hlbhamt.com