CHAPTER 1

INTRODUCTION

DEFINITION OF 'AUDIT'
1. An unbiased examination and evaluation of the financial statements of an organization. It can
be done internally (by employees of the organization) or externally (by an outside firm).
2. An IRS examination of a taxpayer's return or other transactions. The IRS performs this
examination to verify the accuracy of these filings.
The word audit is derived from a Latin word "audire" which means "to hear". During the
medieval times when manual book-keeping was prevalent, auditors in Britain used to hear the
accounts read out for them and checked that the organization's personnel were not negligent or
fraudulent.
The Indian hospitality(hotels) industry has emerged as one of the key industries driving growth
of the services sector in India. It has evolved into an industry that is sensitive to the needs and
desires of people. The fortunes of the hospitality industry have always been linked to the
prospects of the tourism industry and tourism is the foremost demand driver of the industry. The
Indian hospitality industry has recorded healthy growth fuelled by robust inflow of foreign
tourists as well as increased tourist movement within the country and it has become one of the
leading players in the global industry. Foreign tourist arrivals (FTAs) into the country increased
steadily from 2002 to 2008. FTAs dipped in 2009, due to the global economic slowdown;
however, the impact on the Indian industry was much lower than that on the global counterparts.
FTAs are expected to increase in 2010. On the other hand, domestic tourist movement within the
country was the highest in 2009.
Industry characteristics
Major characteristics of the Indian hospitality industry are:

High seasonality
The Indian hotel industry normally experiences high demand during OctoberApril, followed
which the monsoon months entail low demand. Usually the December andMarch quarters bring
in 60% of the years turnover for Indias hoteliers. However, this trend is seeing a change over
the recent few years. Hotels have introduced various offerings to improve performance
(occupancy) during the lean months. These include targeting the conferencing segment and
offering lucrative packages during the lean period.
Labour intensive
Quality of manpower is important in the hospitality industry. The industry provides employment
to skilled, semi-skilled, and unskilled labour directly and indirectly. In India, the average
employee-to-room ratio at 1.6 (2008-09), is much higher than that for hotels across the world.
The ratio stands at 1.7 for five-star hotels and at 1.9 and 1.6 for
the four-star and three-star categories respectively. Hotel owners in India tend to over-spec
their hotels, leading to higher manpower requirement. With the entry of branded international
hotels in the Indian industry across different categories, Indian hotel companies need to become
more manpower efficient and reconsider their staffing requirements.

Classification of hotels
The Ministry of Tourism has formulated a voluntary scheme for classification of operational
hotels into different categories, to provide contemporary standards of facilities and services at
hotels. Based on the approval from the Ministry of Tourism, hotels in India can divided into two
categories:
DoT (Department of Tourism) classified hotels & DoT (Department of Tourism) unclassified
hotels

Classified hotels
Hotels are classified based on the number of facilities and services provided by them. Hotels
classified under the Ministry of Tourism enjoy different kinds of benefits such as tax incentives,
interest subsidies, and import benefits. Due to lengthy and complex processes for such
classification, a significant portion of the hotels in India still remain unclassified. The Ministry
of Tourism classifies hotels as follows:

Star category hotels

Heritage hotels

Licensed units

Star category hotels

Within this category, hotels are classified as five-star deluxe, five-star, four-star, three-star, twostar and one-star.
Heritage hotels
These hotels operate from forts, palaces, castles, jungles, river lodges and heritage buildings.
The categories within heritage classification include heritage grand, heritage classic and heritage
basic.
Licensed units
Hotels/establishments, which have acquired approval/license from the Ministry of Tourism to
provide boarding and lodging facilities and are not classified as heritage or star hotels, fall in this
category. These include government-approved service apartments, timesharing resorts, and bed
and breakfast establishments.
Branded players
This segment mainly represents the branded budget hotels in the country, which bridge the gap
between expensive luxury hotels and inexpensive lodges across the country. Budget hotels are
reasonably priced and offer limited luxury and decent services. Increased demand and healthy
occupancy have fuelled growth of budget hotels. These hotels use various cost control measures
3

to maintain lower average room rates without compromising on service quality. Ginger Hotels,
ITC Fortune, Hometel, and Ibis are some of the popular budget hotels.

Other smaller players

These are small hotels, motels and lodges that are spread across the country. This segment is
highly unorganized and low prices are their unique selling

Growth drivers
The fortunes of the hospitality industry are closely linked to the tourism industry and hence
tourism is one of the most important growth drivers. In addition, all factors that aid growth in
the tourism industry also apply to the hospitality industry. The Indian hospitality industry has
recorded healthy growth in recent years owing to a number of factors:

TYPES OF AUDIT:
1. Statutory Audit: any audit carried on as per the requirement of law is called as a statutory
audit. eg: all companies have to get their accounts audited as per the provision of the
companys Act of 1956.
2. Periodical/ Annual Audit: it is a kind of audit where the auditor verifies the account at the
end of the financial year. He starts the audit work after the closure of financial year. This is a
common audit and is mostly used by small organizations.
3. Interium audit: its an audit conducted in the middle of the accounting year before the
accounts are closed. In other words any audit conducted between two financial audit is
known s interium audit. The objective is to get periodical results, to declare interium
dividend.
4. Partial Audit: when an auditor is asked to audit only a part of the account system. Its called
partial audit. Eg: he may be asked to audit only the payment side of cash book.
5. Balance sheet audit: its a kind of partial audit and is concerned with the verification of only
those items appearing in the Balance Sheet. It is more popular in the USA. Infact while
verifying BS items the auditor verifies/ checks all related items/accounts.
6. Cost audit: cost audit is defined as the verification of cost accounting records. Data and
techniques for its accuracy and authenticity. It gets as effective managerial tool for the
detection of errors and frauds in cost accounting records. The companies act implies the
central government to order cost audit incase of specifies companies.
7. Management audit: Management audit may be defined as a comprehensive examination of
an organizational structure of a company, institution/government and its plans and objectives
it means of operations and use of human and physical facilities. The main objective of mgt
audit is to see how far the objectives of mgt are fulfilled. It aims to ascertain whether sound
mgt prevails throughout the organisation and evaluates its efficiency in the system of its
operation.
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8. Continuous audit: a continuous audit is one in which the auditor visits his clients office at
regular intervals through out the year to verify the account. The objective of CA may bea. To get final account audited immediately after the closure of accounting year.
b. When the business is very large.
c. When interval control system is into effective.
d. When regular final accounts are required.
ADVANTAGES:
1. Errors and frauds are discovered and rectified quickly.
2. The chances of fraud are reduced.
3. The workers will be careful in their work.
4. Continuous audit acts as a valuable morale check on the staff.
5. Final audit becomes easier and faster.
6. If the company wants to declare interium dividend its easier to prepare interium account.
7. It increases the efficiency and accuracy in the accounts.
DISADVANTAGES:
1. After the auditors visit is over, alternative may be made.
2. It affects the regular work.
3. Its not suitable for small organizations.
4. The auditor may loose the line of work if he does not complete his work in a visit.

Scope of Study:
This study deals with the auditing procedure and conduct of audit in ITC Hotel . The Study in
this Paper is confined to the information collected from secondary sources.
Limitation of Study:
All the information in this study is limited to the auditing of Hotel Industry and the respective
information for the same is limited to the information collected from the secondary sources.
Research & Methodology:
All the information in this study is collected from the secondary sources. The respective
information is collected from internet and some auditing books of ICAI
6

Chapterisation:
The study of the auditing in Bajaj Allianz General Insurance Company is arranged in the
following Sequences:
Chapter I : It focus on the introduction of the overall study in this project paper
Chapter II : It concentrate on the brief explanation of the company profile of ITC HOTEL
Chapter III : It explains the various auditing procedure followed by the auditor in the ITC
HOTEL
Chapter IV : This Chapter deals with the FINDING,SUGGESTION& CONCLUSION of the
project study.

CHAPTER 2
PROFILE OF THE HOTEL

ITC Hotels is India's second largest hotel chain with over 100 hotels.Based in the Hotels
Division Headquarters at the ITC Green Centre in Gurgaon, New Delhi, ITC Hotels is also the
exclusive franchisee of The Luxury Collection brand of Starwood Hotels and Resorts in India. It
is part of the ITC Limited (formerly India Tobacco Company) group of companies. ITC Hotels
is regularly voted amongst the best employers in Asia in the hospitality sector.

ITC Limited entered the hotel business on 18 October 1975 with the opening of a hotel in
Chennai, which was renamed Hotel Chola. In 2006, ITC hotels owned and operated 100 hotels in
75 locations. ITC Hotels have a reputation of playing host to visiting royalty and world leaders
time and again. ITC Restaurants Bukhara, Peshawari, Dakshin, DumPukht and Kebabs &
Kurries are well known cuisine brands today. They market a line of food products, Kitchens of
India.

ITC Hotels has one of the most extensive art collections in India. A museum of their collection is
being planned in Kolkata. ITC Grand Bharat is their latest hotel established in Manesar,
Gurgaon.

ITC BRAND
The group today operates under several distinct brands:

Luxury Collection Hotels

Sheraton Hotels

Fortune Hotels, which has 54 hotels with 4,446 rooms in 41 cities across India[12]

Welcome Heritage Hotels

ITC was incorporated on August 24, 1910 under the name Imperial Tobacco Company of India
Limited. As the Company's ownership progressively Indianised, the name of the Company was
changed from Imperial Tobacco Company of India Limited to India Tobacco Company Limited
in 1970 and then to I.T.C. Limited in 1974. In recognition of the Company's multi-business
portfolio encompassing a wide range of businesses - Fast Moving Consumer Goods comprising
Foods, Personal Care, Cigarettes and Cigars, Branded Apparel, Education and Stationery
Products, Incense Sticks and Safety Matches, Hotels, Paperboards & Specialty Papers,
Packaging, Agri-Business and Information Technology - the full stops in the Company's name
were removed effective September 18, 2001. The Company now stands rechristened 'ITC
Limited'.
The Company's beginnings were humble. A leased office on Radha Bazar Lane, Kolkata, was the
centre of the Company's existence. The Company celebrated its 16th birthday on August 24,
1926, by purchasing the plot of land situated at 37, Chowringhee, (now renamed J.L. Nehru
Road) Kolkata, for the sum of Rs 310,000. This decision of the Company was historic in more
ways than one. It was to mark the beginning of a long and eventful journey into India's future.
The Company's headquarter building, 'Virginia House', which came up on that plot of land two
years later, would go on to become one of Kolkata's most venerated landmarks.
Though the first six decades of the Company's existence were primarily devoted to the growth
and consolidation of the Cigarettes and Leaf Tobacco businesses, the Seventies witnessed the

beginnings of a corporate transformation that would usher in momentous changes in the life of
the Company.
ITC's Packaging & Printing Business was set up in 1925 as a strategic backward integration for
ITC's Cigarettes business. It is today India's most sophisticated packaging house.
In 1975, the Company launched its Hotels business with the acquisition of a hotel in Chennai
which was rechristened 'ITC-Welcome group Hotel Chola' (now renamed My Fortune, Chennai).
The objective of ITC's entry into the hotels business was rooted in the concept of creating value
for the nation. ITC chose the Hotels business for its potential to earn high levels of foreign
exchange, create tourism infrastructure and generate large scale direct and indirect employment.
Since then ITC's Hotels business has grown to occupy a position of leadership, with over 100
owned and managed properties spread across India under four brands namely, ITC Hotels Luxury Collection, Welcome Hotels, Fortune Hotels and Welcome Heritage.
In 1979, ITC entered the Paperboards business by promoting ITC Bhadrachalam Paperboards
Limited. Bhadrachalam Paperboards amalgamated with the Company effective March 13, 2002
and became a Division of the Company, Bhadrachalam Paperboards Division. In November
2002, this division merged with the Company's Tribeni Tissues Division to form the Paperboards
& Specialty Papers Division. ITC's paperboards' technology, productivity, quality and
manufacturing processes are comparable to the best in the world. It has also made an immense
Andhra Pradesh. It is directly involved in education, environmental protection and community
development. In 2004, ITC acquired the paperboard manufacturing facility of BILT Industrial
Packaging Co. Ltd (BIPCO), near Coimbatore, Tamil Nadu. The Kovai Unit allows ITC to
improve customer service with reduced lead time and a wider product range.
Launched in 1975, ITC Hotels, India's premier chain of luxury hotels, has become synonymous
with Indian hospitality. ITC Hotels pioneered the concept of 'Responsible Luxury' in the
hospitality industry, drawing on the strengths of the ITC groups exemplary sustainability
practices. Responsible Luxury personifies an ethos that integrates world-class green practices
with contemporary design elements to deliver the best of luxury in the greenest possible manner.
Fortune Hotels are the brainchildren of ITC ltd which is a large commercial conglomerate.
Fortune Hotels have done a splendid job of establishing its brand as a premium hotel brand.
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Their chain of 3-4 star hotels across 18 locations in India are mostly business hotels situated in
metropolitan areas.
Branded Accommodation
ITC Hotels has set standards for excellence in the hotel industry by pioneering the concept of
branded accommodation. The chain has developed three brands of accommodation ITC One',
'Towers' and the 'Executive Club' to differentiate between the needs of various travellers and
provide the highest levels of service.
Branded Cuisine
ITC Hotels is one of the first to introduce branded cuisine Welcome Cuisine - in India. The
Bukhara and Peshawri restaurants give epicures the rugged, outdoor cuisine of the Northwest
Frontier Province. Dakshin has brought together the highly evolved cuisines of the four southern
states- Andhra Pradesh, Karnataka, Tamil Nadu and Kerala. Dum Pukht is a unique restaurant
dedicated to a 200-year old culinary tradition of slow cooking food, in sealed deghs. The
fragrance of the meal becomes an invitation befitting royalty. Today the connoisseur can
savourthese delicacies across the country. The sumptuous fare at Kebabs and Kurries comprises a
mouth-watering array of kebabs and a wide range of dishes from all over India. These dishes can
be categorized as Qualms, Qaliyas or Salans.
Rated high by food connoisseurs all over the world, ITC Hotels takes exceptional pride in
showcasing its internationally renowned cuisine. West View brings a careful selection of western
cuisine s from the remote France chateaux, grill houses on the East and West coasts of America,
rosy kitchens of English manors, leisurely Mediterranean villas and bustling German
marketplaces.
ITCs corporate strategies are:
Create multiple drivers of growth by developing a portfolio of world class businesses that best
matches organizational capability with opportunities in domestic and export markets.Continue to
focus on the chosen portfolio of FMCG, Hotels, Paper, Paperboards & Packaging, Agri Business
and Information Technology.Benchmark the health of each business comprehensively across the
criteria of Market Standing, Profitability and Internal Vitality.Ensure that each of its businesses is
11

world class and internationally competitive.Enhance the competitive power of the portfolio
through synergies derived by blending the diverse skills and a capability residing in ITCs
various businesses.Create distributed leadership within the organization by nurturing talented and
focused top management teams for each of the businesses.
Continuously strengthen and refine Corporate Governance processes and systems to catalyze the
entrepreneurial energies of management by striking the golden balance between executive
freedom and the need for effective control and accountability.
Company Facilities:
No director, senior management and employee shall misuseCompany facilities. In the use of
Company facilities, care shall be exercised to ensure that costs are reasonable and there is no
wastage.

ITC Hotels
ITC Hotel Luxury Collection
ITC Maurya, New Delhi
ITC Mughal, Agra
ITC Maratha, Mumbai

ITC Grand Central,

Mumbai
ITC Sonar, Kolkata
ITC Windsor, Bengaluru

CHAPTER 3
AUDITING IN ITC HOTELS

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Audit Of Hotel Introduction

Your Hotel Audit will uncover hidden revenue potentials and cost saving for your hotel. Through
our in depth evaluation we identify strengths and weaknesses in your financial and operational
structure. We provide a basis for your action plan to strengthen your hotel against your
competition. With many years of Hotel audit experience our skills will be one of the most
valuable investments you will make this year.

ITC Hotel Audit Work Program

This tool is a comprehensive work program to use as a guideline for auditing a hotel. It covers
many processes related to hotel management, and can also be modified for other hospitality and
service operations such as restaurants.
Proper hotel accounting procedures provide the foundation on which all financial decisions are
based. That's why ITC provides an experienced hotel accounting team coupled with a centralized
hotel accounting system, which together ensure comprehensive accounting services that are
efficient, organized and straightforward, and result in reduced operating costs for your property.
Hotel Accounting Services

Daily Operations Reports

Daily labour, revenue, purchasing and operating statistics, all compared to forecasts or budget,
are prepared at your property under corporate review and supervision.
Cash Flow Reports
Cash flow reports are provided weekly, monthly or on an as-needed basis at the corporate level
with input on revenue and expenses from your property

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Accounts Payable
A key area in accounting, accounts payable ensures that all bills are paid on time and all
discounts are taken minimizing the costs of the hotel. Accounts payable clerks work closely with
the purchasing department to verify that all invoices to be paid are indeed invoices of the hotel.
Assistant Controller
In a big hotel, you may see one, or a few, assistant controllers. In smaller hotels, there may not be
any. The controller divides the various functions to be performed so that the workload will be
even. For example, one assistant might be responsible for daily transactions while another works
on special projects, budgets, analyses, and the like.
Guest and City Ledgers
A hotel keeps two ledgers: the guest ledger is associated with the guests staying at the hotel
while the city ledger contains all other billings. It is important that the accounting department has
a person in accounts receivable working with the city ledger so the hotel is able to bill and collect
revenues due.
Night Audit
Night auditors get their name because of the hours they work. At the end of the day after most
hotel guests have retired, these auditors begin recording charges to guests accounts and
verifying the revenue for the hotel. However, with computers and various technologies, the hotel
industry can post charges instantaneously. Some hotels have actually changed the night auditors
to become day auditors.
Banquet Auditor
Besides revenues charged to guest rooms, a large hotel earns the bulk of its food and beverage
revenues through banquets. The banquet auditors function is to verify the correct revenue for
billing. This individual works closely with the banquet staff, the sales office staff, and the
accounts receivable clerks.

Credit
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A big hotel may have its own credit manager whose function is to check and grant credit. In
todays business world, many transactions are done on credit rather than cash or cashier checks.
It is, therefore, the credit managers responsibility to conduct such investigations to be sure that a
person or company is creditworthy.
Food and Beverage Controller
This is a fun and challenging position, as it has both accounting and food and beverage
components. While performing all analyses of food cost percentage, yields on meat, and menu
costing, the food and beverage controller also works with the chef to design new menu items,
taste new products, and even be a mystery diner to taste-test the menus in other foodservice
establishments.
Front-Office Cashiers
The duties of a front-office cashier are often incorporated with the front-office personnel. When
guests check out, it is the duty of these cashiers to charge the guests the correct amount and
secure a form of payment.

General Cashier
Pause for a minute and think how many cash banks there are in a large hotel: a few at the front
office, at least one in the restaurant, at least one in the gift shop, and so on. The general cashier is
the person who is in charge of all the cash banks in the hotel. He or she also makes all deposits of
checks and credit card receipts.
Operations Analyst
This is a nice position to have in a hotel. An operation analyst performs analyses to help
managers operate the hotel more effectively. From guests statistics to revenue trends, the
operations analyst does it all. However, not all hotels are able to afford an analyst on the payroll.
If this is the case, an assistant controller often performs these duties. For smaller hotels where
there is not an accounting office on the property, this function is done at the regional level

15

General Ledger Maintenance

ITC uses the chart of accounts conforming to the Uniform System of Accounts for the Lodging
Industry.
Tax Reporting
ITC submits state and local sales and occupancy tax forms as well as assistance with income tax
information..
AUDIT OF FIXED ASSETS
Audit Objectives
1.

Fixed assets, recorded in books, are actually in existence, owned by the entity and are

used in operations.
2.

No unrecorded fixed asset is in existence.

3.

Fixed assets sold, abandoned, or otherwise disposed of have been eliminated from the

financial statements. Fixed assets, retired from active use and held for disposal, have been stated
at the lower of their net book value and net realisable value and are shown separately in the
financial statements.
4.

Subsequent amount spent on existing fixed assets have been capitalised only in a case

where it increases the future benefits from the asset beyond its previously assessed standard of
performance, e.g., where it increases the capacity.
5.

Valuation of fixed assets is appropriate keeping in view the generally accepted accounting

principles and these principles have been consistently applied.

6.

All the assets obtained on finance lease, on or after 1st April, 2000, are recognised as

assets in the financial statements as per Accounting Standard (AS) 19, Leases, issued by the
Institute of the Chartered Accountants of India. Operating lease rentals have been appropriately
charged as an expense over the life of lease.
7.

Any impairment in the value of fixed assets has been appropriately recognised in the

financial statements.

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Audit Procedures

1.

Trace and verify opening balances of fixed assets from previous year audited financial

statements.
2.

Review significant expenditure related to fixed assets incurred during the year to ensure

that the expenditure incurred on purchase of new fixed assets has been properly capitalised.
3.

Obtain a list of fixed assets disposed of during the period and verify computation of

profit/loss, if any, on the same on sample basis.

4.

Verify that the items of fixed assets, retired from active use and held for disposal, have

been stated at the lower of their net book value and net realisable value and are shown separately
in the financial statements. Also verify that any expected loss has been recognised immediately
in the statement of profit and loss.
5.

Ensure that depreciation on fixed assets has been charged at the rates which are not lower

than the rates prescribed in applicable statute, if any, to the enterprise, e.g., rates prescribed in
Schedule XIV to the Companies Act, 1956, would be relevant for the companies registered under
the Act.
6.

In case depreciation on fixed assets has been charged at rates higher than those prescribed

in the applicable statute on the grounds of lower useful life, the report of the technical expert
must be verified.

7.

Perform analytical review procedures on computation of depreciation on major fixed

assets as also on useful life of the assets.

8.

Verify that the fixed assets register has been duly maintained and updated on regular

basis. Further, various balances appearing in the fixed asset register should be reconciled with
the books of account.
17

9.

Physical verification of various fixed assets should be carried out and discrepancies

noticed, if any, should be properly analysed and reconciled.

PROFIT AND LOSS ACCOUNT

Audit Objectives
1.

All the items of revenue and expenses have been properly recorded and recognised.

2.

Proper adjustments have been made for expenses accrued / outstanding at the year-end

and for the prepaid expenses.

3.

Proper adjustments have been made for income accrued at the year-end and for the

income received in advance.

4.

Adequate provision has been created for expected un-collectable portion of debtors and

the individual items have been charged off on becoming un-collectable.

5.

Recognition, measurement and disclosure requirements laid down in various

pronouncements of the Institute of the Chartered Accountants of India have been duly complied
with.

Audit Procedures
Sales and Purchase Accounting
1.

Perform walk-through tests to examine the system of accounting and internal control with

regard to sales and purchases.

2.

Identify and test controls on which reliance is to be placed.

3.

In case accounting and/or internal control system has undergone a change during the year,

re-perform tests as stated in (1) and (2) above to the extent required and document the same.
4.

Apply necessary tests on the systems and controls, designed to prevent errors and frauds,

to obtain the desired level of confidence. In case the desired level of confidence cannot be
18

obtained by applying these tests, its impact on the accounts and audit must be ascertained and the
auditor should consider applying the additional tests.
5.

Determine significant variances for major heads of revenue and expenditure vis--vis the

budget figures and the corresponding figures for the previous year.
6.

Identify unusual items of revenue and expenditure in the profit and loss account.

7.

Ascertain/obtain reasons from the management for such variances and unusual items and

these reasons should be properly documented.

8.

Obtain corroborative evidence for managements explanations of significant matters.

Analytical Review of Individual Items

9.

Compare monthly room rent revenue with the budgeted amount and with the revenue for

the corresponding month of the previous year/period.

10.

Compare monthly room rent revenue with the revenue computed on the basis of industry

trends and occupancy rates for the month.

11.

Carry out a global check on the room rent revenue by considering industry occupancy

rates (particularly in that market segment) and the room rates charged by the hotel.
12.

Obtain necessary information and explanations from the management for major

variances, if any, and ensure that all information and explanations for variances are consistent
with the relevant available information.
13.

Compare and analyse monthly relationship of food and beverages revenue with room rent

revenue besides comparing actual food and beverage revenue with budgeted revenue and
revenue for the corresponding month in previous year.
14.

Verify reasonableness of banqueting income by comparing the same with the income for

the corresponding previous period and the budgeted income. Any material variances should be
properly analysed and investigated.
15.

Assess reasonableness of interest received and interest paid by comparing the same with

the interest computed on the basis of the average balance outstanding and applicable rates of

19

interest. Further, ensure on test basis that interest has been received and paid at rates contracted
and computation of interest should also be checked on sample basis.
PAYROLL
Audit Objectives
1.

Amounts outstanding at the year-end as also the amounts paid in advance have been

recorded and properly adjusted in the financial statements for the period.
2.

Amounts recorded as payroll expenses accurately represent the value of services received

by the entity.
3.

Allocation of various expenses to assets, expenses, and other accounts has been done

correctly on reasonable and equitable basis and applied consistently.

4.

Accounting principles applied to various employee benefit costs including health care,

pension and other post-retirement benefit costs are appropriate keeping in view various
pronouncements of the Institute of the Chartered Accountants of India such as Accounting
Standard (AS) 15, Accounting for Retirement Benefits in the Financial Statements of the
Employers. It should also be ensured that the accounting principles have been appropriately
disclosed in the notes to the financial statements.

Audit Procedures
Accounting System and Internal Control
1.

Perform walk-through test to examine accounting system and internal control with regard

to payroll.
2.

Identify and test controls on which reliance is to be placed.

3.

In case accounting and/or internal control system has undergone a change during the year,

re-perform tests as stated in (1) and (2) above to the extent required and document the same.
20

4.

Apply necessary tests on the systems and controls, designed to prevent errors and frauds,

to obtain the desired level of confidence. In case the desired level of confidence cannot be
obtained by applying these tests, its impact on the accounts and audit must be ascertained and the
auditor should consider applying the additional tests.
5.

Examine and review the segregation of duties within the payroll department and EDP

department.
6.

Carry out analytical review of payroll costs using key performance indicators.

7.

Make comparison of current year payroll cost with the budgeted cost as also with the cost

for the previous year.

8.

Apply trend analysis on payroll cost incurred and benefit received by the department.

9.

Compute a ratio of profit as a percentage of payroll costs for each department and

compare the same with the prior years as also with the industry standards.
10.

Obtain necessary information and explanations from the management for major

variances, if any, noticed at steps 7 to 9 and ensure that all information and explanations for
variances are consistent with the relevant available information.
11.

Check relevant documents relating to fresh appointments and for resignations.

12.

Review payroll sheets to identify unusual items and significant variances and obtain

explanations from the management for such unusual items and variances.
13.

Analyse relationship between casual labour cost and monthly occupancy rate, compare

the same with previous year figures and industry standards and obtain explanations from
management for significant variances.
14.

Verify that timely payment of payroll related statutory dues such as tax deducted at

source, provident fund, ESIC, etc., has been made.

15.

Review the correctness of various calculations done by actuaries with regard to

retirement benefits and ascertain reasonableness of assumptions used.

16.

Examine the following documents for their relevance to the period under audit:

21

Contracts with unions

Other employment contracts

Employee benefit plans

Post retirement benefits.

STOCK VERIFICATION
1.

Obtain a copy of the stocktaking instructions to ensure that these instructions are

adequate from the control viewpoint and also ensure that these instructions have been duly
complied with.
2.

Identify all stock locations to ensure the coverage of all locations in the stocktaking

process.
3.

Identify important items from the stock sheets and physically verify them. Discrepancies

noticed, if any, should be properly documented.

4.

Select certain items of inventory on random basis and ensure that these appear properly in

the stock sheets.

5.

Identify important items of inventory from the stock ledger and confirm their balances in

the stock sheets.

6.

Select certain items of inventory from the stock sheets (other than those covered referred

in 5 above) and trace their balances in the stock ledger.

7.

Ensure that the stock sheets are referenced / numbered in a manner which ensures their

completeness.
8.

Obtain details of cut-off procedures used on inventories from all documents pertaining to

movement of stocks.
9.

Identify any damaged or slow / non-moving stock, as also stocks in excess of current

requirements.

22

STOCK VALUATION
1.

Ensure that the principles relating to valuation of inventories stated in Accounting

Standard (AS) 2, Valuation of Inventories, issued by the Institute of the Chartered Accountants of
India, have been duly complied with.
2.

Verify that the principles relating to valuation of inventories have been followed

consistently from year to year, i.e., the valuation principles followed in the current year are the
same as those followed in previous year.
3.

Independently determine lower of net realisable value and cost for certain important

items of inventory and ensure that their valuation is correct.

4.

Carry out an analytical review on the value of stock by comparing the same with the

budgeted value as also with the value of inventories at the end of the previous year.
5.

In case significant variances are found in the valuation of inventories, category-wise

analytical review must be carried out and reasons for variances in value of each category must be
ascertained from the management and properly documented.
6.

Verify that appropriate provision has been created on damaged or slow/ non-moving

stock, as also on stocks in excess of current requirements.

DEBTORS
1.

Examine the relevant records to ensure validity, accuracy and recoverability of debtor

balances.
2.

The balances of debtors shown in the schedules must be tallied with those shown in the

ledger accounts. Further, the total of schedules must be tallied with the control account of
debtors as appearing in the ledger accounts. Any differences in this regard should be clearly
examined and analysed.
3.

In case of significant debtors, the correspondence and other documentary evidence must

also be verified to ensure their validity and accuracy.

23

4.

For larger balances, subsequent realisations might also be verified.

5.

Bad debts written off or excessive discounts or unusual allowances should be verified

from the relevant correspondence.

6.

Review city ledger and front office reconciliation for the year and investigate any unusual

or significant items in the reconciliation.

7.

Ensure that year-end charges made to guests have been adjusted for credit

notes/allowances given in the next accounting year.

8.

Examine credit balances in Sundry Debtors Account and after verifying correctness

thereof ensure that these are grouped under creditors.

9.

Obtain explanations from the management with regard to doubtful debts and verify the

same with the corroborative evidence available. Further, it should be ensured that provision for
doubtful debts is adequate.
10.

Obtain an aging analysis of guest balances to identify old debts in respect of which

provision has not been made, check all correspondence in relation thereto, and obtain
explanations from the management before deciding upon whether a provision ought to be made.
11.

Assess the effectiveness of credit control; the measures taken to ensure credit-worthiness

of the significant debtor groups such as corporates, travel agents and long-staying guests before
extending credits.
ROOMS
2.13

Rooms generally constitute the biggest source of revenue for a hotel. Approximately,

60% - 62% of the gross revenue of a hotel comes from room rent. Normally, contribution from
this source of revenue comes out to be more than 70% due to the low variable costs. The various
operations relating to rooms normally are as follows :

Front Office, including reservations

Bell-desk

24

Housekeeping

General Administration

Front Office
Reservations

Normally, a separate person from the front office is made responsible for making all advance
bookings/reservations. Reservations may be made based on direct inquires from the guests or
through other diverse sources such as travel agents, reservation networks ( in the case of an
enterprise operating a chain of hotels), secretaries of executives and through sales and marketing
department. The person responsible for making reservations normally prepares a list of bookings
for the next day, inter alia, stating room rate to be charged, discount to be allowed on the
standard rate, billing instructions, airport pick-up status and expected date and time of departure,
etc. the list so prepared is sent to other departments for taking necessary action at their end.
Filling of Registration Card

Each guest is required to fill-up a registration card at the front office. The registration card
normally records the name and address of the guest, the nationality, passport number (in case of a
foreign national), the arrival date and time as also the expected departure date and time. The
registration card is required to be signed by the guest and a responsible office of the hotel. After
the guest has filled-in and signed the registration card, the room number allotted to the guest as
also tariff to be charged is filled-in. The discount allowed to the customer on the standard rate is
also recorded on the registration card. The discount granted to the customer can be either
contractual or based on the negotiations made across the counter. The arrival of customer is also
recorded in the guest folio of the guest ledger.

Intimation to other operating departments

25

At the time a room is sold, the front office intimates the relevant details to the housekeeping and
other operating departments. The basic objective of intimation is to inform the other operating
departments about the sale of room so that they gear up to provide the required services. While
intimating, rooms with scanty baggage, if known, are highlighted.

Reconciliation of Guest Count as per the housekeeping department with Guest Folio.
The housekeeping department, which is responsible for the proper upkeep of the guest areas,
more particularly rooms, prepares a guest count report atleast once a day and sends a copy of the
same to the Front Office. The Front Office is required to compare the report with the guest folio.
The discrepancies noticed, if any, between the two counts are required to be duly reconciled,
with a view to ensure that there is no leakage of revenue.

For example, an extra bed

requisitioned after check-in might get recorded from the housekeeping report.
Report of Guests Checking Out
It is a practice in most of the medium and large hotels to circulate a report of guest check-outs for
the next day to all operating departments. Such a practice is useful in ensuring that all the
charges have been posted to the guest folio before raising the final bill on the customer and,
therefore, reduces the chances of leakage of revenue.

ROOM REVENUE
As stated earlier, rooms are the largest source of revenue for a hotel both in terms of gross
revenue and in terms of contribution.

The method of checking/analysing room revenue,

therefore, assumes greater significance.

Letting out of room is usually recorded in more than one record, for example in the guest folio,
housekeeping department report, etc.

Normally, more than one person is involved in the

preparation of these records. In view of this, the possibility of manipulating room sales is
26

normally less since in order to omit a sale from the records it would be necessary to omit the
entry of the guest from all records. In large hotels, many persons are involved in maintenance of
records relating to room sales and, therefore, intentional omissions become practically
impossible, and unintentional errors or omissions can be detected quickly.

Food and beverages income generally moves in tandem with room rent revenue, since the
resident guests usually consume food and/or take drinks at the restaurant/bar of the hotel during
their stay. For instance, a large proportion of resident guests have their breakfast at the hotel.
This relationship between room rent revenue and food and beverages income would be stronger
in case of resorts that are situated at places away from the city. City based hotels normally also
try to attract customers who are not staying at the hotel for food and beverages. Thus, the
relationship between food and beverages income and room rent revenue may vary depending
upon the type of the hotel.
The most important aspect of verification of food and beverages income would be the
examination of serial control on paid and unused bills. Control on cash bills can be exercised
through review of the cash summary sheets containing details of the sales for a particular
day/shift. The auditor could also apply surprise on-line checks on the serial control. The said
check might be applied either during the day or while carrying out audit on the sale of the day
that does not fall within the audit period.

The other core areas of its consideration are as follows

Conduct a market Audit.

Analysis of market competition.
Market place analysis.
Formulation of new schemes and niche offerings.
Selection of profitable market segments.
Positioning the property.
Establishing the objectives and the action plan

27

HIERARCHY OF SALES & MARKETING

Head of sales Associate Head of Sales Sales Executives Sales coordinators
Purchase Department
While operating a hotel is supposed to be a difficult task, managing the entire procurement
process (for such a unit) is even more so. The purchase department handles the task of
procurement yet all departments play a crucial role in it. That said technology ensures that interdepartmental activities takes place flawlessly. Although purchase has now become dependent on
technology for managing inventories and order status, it was originally a manual job. From
selection of products to deciding on a vendor, this department rests on the human ability of In
most modern hotels, the installation and service of elevator systems is generally the province of
the elevator manufacturer, and hotels typically have extended maintenance agreements for the
elevators. Most engineering departments, however, closely monitor the operation of the elevator
systems. In modern high-rise hotels with high speed elevator service, the slightest problem with
that service should be quickly and easily identified and reported to the contractors. It is generally
the responsibility of the engineering department to monitor these services and their contracts
closely and carefully.

SECURITY DEPARTMENT

The security of guests, employees, personal property and the hotel itself is an overriding concern
for todays hoteliers. In the past, most security precautions concentrated on the prevention of
theft from guests and the hotel. However, today such violent crimes as murder and rape have
become a problem for some hotels. Unfortunately, crime rates in most majors cities are rising.
Hence today security department also concentrate on these additional criminal activities too. The
main position in the security department is of the Assistant Security Manager. The department
includes the fire and safety officer and the duty guards. The primary function of the security
department is to provide property surveillance and protection to the guest. The latter is more
important for the security department. In the hotel there are two variants of security staff working
28

round the clock indifferent shifts. First is the direct security staff of the hotel working in three
different shift of 8 hour duration? Considering flawless security to the guests, all the guest rooms
of the hotel are installed with spring glass and smoke detectors and automatic alarm system.
There is a central security office working inside the hotel with all the modern fire Fighting
equipments such as fire extinguishers, dry powder, and other fire dousing facilities. As a part of
the security provision both to the hotels property and the guests the entire geographical area of
the hotel is divided in to 3 portions such as Beach Viewpoint, Tide point and the Club these
three points are all together known as the assembly point . The most common methods adopted
by the fire and safety wing of the hotel (it came under the security department) are liquid carbon
dioxide, dry powder etc. The security control post of the hotel will be functioning on 24 x 7with
office secretary, night and day supervisor, and security officer. The security setup at the hotel is
faultless since the hotel cannot compromise on the safety of its valuable guests. All the activities
of the security department is controlled and supervised by the main security officer. He is also
responsible for conducting training programmes on security and fire fighting to the security staff
of the hotel.

Balance Sheet
------------------- in Rs. Cr. ------------------ITC
India Tourism D

Indian Hotels

EIH

Mahindra Holida

Hotels
Mar
Mar '12

Mar '12

Mar '13

Mar '13

75.95

114.31

83.88

'04
Sources Of Funds
Total Share Capital

30.21 85.77

29

Equity Share Capital

30.21 85.77

75.95

114.31

83.88

Share Application Money

0.00

0.00

124.37

0.00

0.00

Preference Share Capital

0.00

0.00

0.00

0.00

0.00

Reserves

194.22 223.09

3,167.49

2,510.61 550.43

Revaluation Reserves

0.00

0.00

0.00

Networth

224.43 308.86

3,367.81

2,624.92 634.31

Secured Loans

0.08

0.00

971.18

339.68

1.95

Unsecured Loans

0.00

0.00

1,191.33

0.00

0.00

Total Debt

0.08

0.00

2,162.51

339.68

1.95

Total Liabilities

224.51 308.86

5,530.32

2,964.60 636.26

Gross Block

206.40 142.32

2,814.49

2,825.83 612.51

Less: Accum. Depreciation

71.17 80.93

971.56

709.15

Net Block

135.23 61.39

1,842.93

2,116.68 473.37

Capital Work in Progress

4.14

235.02

39.98

231.42

Investments

68.20 8.14

3,622.19

705.73

185.91

Inventories

1.87

39.79

34.12

6.38

Sundry Debtors

12.05 114.72

124.83

173.56

625.98

Cash and Bank Balance

9.96

35.76

20.36

33.84

Total Current Assets

23.88 384.17

200.38

228.04

666.20

Loans and Advances

56.80 130.18

1,633.62

350.44

687.42

Fixed Deposits

7.00

2.65

0.00

0.00

Total CA, Loans & Advances

87.68 514.35

1,836.65

578.48

1,353.62

Deferred Credit

0.00

0.00

0.00

0.00

Current Liabilities

59.30 209.82

1,290.61

401.68

1,562.07

0.00

0.00

Application Of Funds

3.11

11.25

258.20

0.00

0.00

30

139.14

Provisions

11.45 68.29

715.86

74.59

45.99

Total CL & Provisions

70.75 278.11

2,006.47

476.27

1,608.06

Net Current Assets

16.93 236.24

-169.82

102.21

-254.44

Miscellaneous Expenses

0.00

0.00

0.00

0.00

Total Assets

224.50 308.88

5,530.32

2,964.60 636.26

Contingent Liabilities

24.04 476.29

974.34

190.61

119.95

Book Value (Rs)

74.27 36.01

42.71

45.92

75.62

0.00

CHAPTER 4
FINDINGS, SUGGESTIONS & CONCLUSION
FINDINGS

The employees are satisfied with the nature of work

The supervisor consider the decisions or viewpoints given by the employees The
relationship between the superior and the subordinate is good

The relationship of the with peers is good

31

 The recognition for the contribution to the job is satisfactory The working environment is
encouraging for the employees

The employees are happy with the communication flow followed in the organization

The company will encourage quality of work life in the organization The rating given to
the employees on their performance is satisfactory The employees satisfied with the shifts

The company will encourage work life balance

The training program given to the employees is good.

AWARD AND RECOGNITIONS

Bukhara awarded with " Restaurant of the Year" at NDTV Lifestyle Awards,
March 2013 Dum Pukht awarded with 'Best in Country' recognition at the
S.Pellegrino Asia's 50 Best

Restaurants, Singapore, February 25, 2013

Bukhara recognised amongst S. Pellegrino Asia's 50 Best Restaurants at No. 26,

from close to 900 restaurants in Asia, February 25, 2013
32

ITC Grand Chola receives green rating for integrated habitat assessment by The
Energy Resource Institute (TERI), Ministry of New & Renewable Energy
(MNRE), Government Of India February 2013

ITC Grand Central awarded with The Golden Peacock - Corporate Excellence
Recognition for national training by Institute of Directors January 2013

ITC Grand Chola recognized by HIFI as development of the year in the luxury
and upscale category January 2013

Kaya Kalp recognized as Best Hotel Spa by CondeNast Traveler, India December 2012
o

Bukhara and Dakshin listed amongst Asias Top 20 Restaurants Miele Guide
Asia, January 2013

ITC Grand Chola receives green rating for integrated habitat assessment by The
Energy Resource Institute (TERI), Ministry of New & Renewable Energy
(MNRE), Government Of India February 2013

ITC Grand Central awarded with The Golden Peacock - Corporate Excellence
Recognition for national training by Institute of Directors January 2013

ITC Grand Chola recognized by HIFI as development of the year in the luxury
and upscale category January 2013

Bukhara and Dakshin listed amongst Asias Top 20 Restaurants Miele Guide
Asia, January 2013

Kaya Kalp recognized as Best Hotel Spa by CondeNast Traveler, India

December 2012 ITC Hotels - The Standout Winner for Sustainability , Global
Vision Awards October 2012

33

SUGGESTIONS

It is suggested to have the workers participation in the management

Training program can be improved for the future prospective employees to the meet the
challenges

The preference of the employees can be evaluated by adopting suitable techniques and
methods

Transport facilities is suggested to be given to the employees for their easy movement
Emphasis should be given on the career development aspects of potential employees
which in turns help in organization growth and development

Space for subordinate comments should be provided which results in deeper analysis of
the problem, proper evaluation and effective solution for the same.

Hotel should consider local restaurants as their competitors too and try to attract people
visiting these restaurants as well.

34

 As they are constructing new halls and restaurants, they must consider their pricing
strategy to attract new customers and provide them better quality food at competitive
rates.

They should issue News Letter to let its customers know what are their future plans.
Their existing policy emphasizes on existing customers. They should broaden their
customer base.

CONCLUSION

Tourism is a phenomenon, which has now become a powerful in its own right. It has now
become a vital part in any countrys economy. This is by virtue of the being the highest foreign
exchange earner and an employment in time industry.
The hotel is undergoing a tremendous regarding management, which prefers analyzing
innovative thinking in the administration hotel.
India today has a very strong computerized system making the work easy. Budget hotels cater to
the needs of the budget conscious travellers

35

Lot of private airlines is coming up with open off polices of government of India.
ITC is renowned because of its excellence in providing customer satisfaction. They were
enjoying the status of market leadership rather monopoly since their existence,. ITC should work
to cope with this competition. Whatever the conditions will be, ITC loyal and permanent
customers will always prefer them. As is not up to the expectations so far, therefore, It has an
opportunity to maintain and improve their quality service and retain their customers. It never
compromises on quality.
ITC is aware of the fact that hospitality industry exists in rapidly changing environment, where
new products and innovations are introduced quite frequently. It is one of the biggest names in
the industry and they always keep abreast of their competitors. It relies on its international brand
name and is quite sure that will not be that big a threat.

We conclude that ITC is better than any other hotel located in Bangalore at present and it is
always the first preference for its customers.

BIBLIOGRAPHY

The information provided in this project is collected from various sources like;

ITC website(www.itcportal.com www.wikipedia.com

www.Wikipedia.org
India Today magazines

36

37