The NIGHT AUDIT
- Hotels operate 24X7 so
Front Office regularly review and verify the accounts.
- Audit is a daily review
of guest account transactions at Front Office against revenue center
transactions.
- Audit is performed to
ensure accuracy,
reliability & thoroughness of accounting system.
- Audit of active
non-guest accounts also.
- Audit results in
balanced guest & non-guest accounts, accurate account statements, credit
monitoring
and reports generation.
Why is it called Night Audit?
It is called Night Audit because it is performed at Night. In
olden days, manual system was followed and
nighttime was the most appropriate period for auditing due to very
little business and movement.
FUNCTIONS OF THE NIGHT AUDIT
MAIN PURPOSE: To
verify the accuracy and completeness of guest and non-guest accounts.
SPECIFIC FUNCTIONS:
k Verifying posted entries to guest and
non-guest accounts.
k Balancing all Front Office accounts.
k Resolving room status and rate discrepancies.
k Maintaining guest credit limits.
k Producing operational and managerial reports.
The ROLE OF THE NIGHT AUDITOR
ATTENTION needs to be paid to:
1. Accounting details, Procedural controls, Guest credit
restrictions.
2. Nature of cash transactions.
3. Tracking room reservation and related statistics.
4. Daily summary of cash and credit activities at front desk.
5. Reporting results of operation to the management.
ESTABLISHING AN END OF THE DAY
Generally night shifts are from 11pm to 7am. End of the day is the
closing time of the majority revenue
outlets.
CROSS-REFERENCING
-For internal control purposes, an accounting system should
provide independent supporting
documentation (e.g. a coffee shop guest check and a front office
guest folio) to verify each transaction for
cross-referencing.
- Guest and non-guest accounts are compared with source documents
from revenue centers to prove
individual transaction entries and account totals.
GUEST CREDIT MONITORING
- establishing lines of credit or Credit limit depends upon many factors
such as house limit, floor limit,
guest’s status & reputation etc..
-It determines the potential credit risk of guest. It is reflected
through High Balance Report.
AUDIT POSTING FORMULA
Previous Balance + Debits - Credits = Net Outstanding Balance
PB + DR - CR = NOB
DAILY AND SUPPLEMENTAL TRANSCRIPTS
- A Daily Transcript is a detailed report of all guest accounts
that indicates each charge transaction
affecting a guest account for the day
- A Supplemental Transcript is a detailed report of all non-guest
accounts that indicates each charge
transaction that affected a non-guest account that day.
- Used as the worksheets
to detect posting errors.
- Used in non and semi
automated systems.
- Consists of revenue
center, transaction type and transaction total.
OPERATING MODES FOR NIGHT AUDIT
1) Non Automated (manually)
2) Semi Automated (mechanically)
3) Automated (electronically)
Non - Automated
- Four common night audit forms are used:
a. Daily & Supplemental Transcript (either VTL is directly
used or it is copied on to format from Folios
--columns are summarized or totaled)
b. Guest and Non-Guest Folios
c. Front Office Cash Sheets/ Cash Books
d. Audit Recapitulation Sheet (A complete summary of Front Office
accounting for the day).
Drawbacks:
¨ Not feasible for large hotels.
¨ Prone to errors due to volume of data.
¨ Tedious
¨ May prove costly.
Semi - Automated
- Accounting Posting
Machines are the basis for mechanical auditing. It is most important
development
in the history of Front Office Accounting.
- Posting machines are of
two types:
Electromechanical and Electronic.
Functions of both the machines are same except that -
¨ Electromechanical machine can store limited
no. of department totals.
¨ Electromechanical machine cannot retain total
balances.
¨ Electromechanical machine cannot be combined
with other equipment (at POS).
On the other hand, electronic machines are as good as a PC, in
terms of cost. In fact, they are the
foundation for modern day PMS.
Steps in machine posting
1. Locating the folio.
2. Take folio out of the bucket.
3. Place folio along with the check in the posting machine.
4. Enter previous closing balance.
5. Post the check amount with department code.
6. Machine balances the folio.
7. Folio is refiled in bucket.
Simultaneously, the following occurs:
1. The voucher is imprinted with the same information as posted to
the accounts folios (this acts
as a verification that the voucher has been posted).
2. Identical information printed on an Internal Machine Paper Tape
(known as Audit Trail).
3. Amount of each charge is added to or subtracted from the
running departmental total.
Forms/ Formats used in Auditing
1. FO Cash Report
2. D-Report (Night Auditor's Report/ D-Card): It mentions the
total opening balance, debits, credits & net
outstanding balances. Used for reconciliation with departmental
summaries.
Fully – Automated
- There is complete
computer interfacing. The computer in a fraction of time performs all Audit
Functions
(Guest Ledger & Non Guest Ledger compared with daily
departmental reports to locate errors).
- Computer guides the
auditor/ user through the stages in auditing. It asks for certain data inputs
before
beginning with the audit process.
- Computer performs all
the vertical checks. It Organizes, Compiles & Prints the records. System
Updates are run at the end of the day.
NIGHT AUDIT PROCESS
- Focus is on Two Areas:
1. Discovery and Correction of accounting errors.
2. Creation of accounting and management reports.
- The degree of audit scrutiny depends on:
1. Frequency of errors – relates the quality of Front Office work.
2. No. of Transactions to be reviewed- correlates with the size
and complexity of the hotel.
Steps -
1. Complete outstanding postings.
2. Reconcile room status discrepancies.
3. Verify Room Rates.
4. Balance all departmental accounts.
5. Verify No-Show reservations.
6. Post Room Rates & Taxes.
7. Prepare required Reports.
8. Prepare Cash receipts for deposit.
9. Clear or Back up the system.
10. Distribute Reports.
Complete outstanding postings
- Ensuring proper posting
of all transactions affecting non-guest and guest accounts.
- Transactions are
supposed to be posted to accounts as they are received. Night Auditor has to
ensure
that all vouchers are posted.
- Further he has to verify
(even in computerized system) the postings. This he does by matching reports
from interfaces with reports from Front Office system in a
computerized environment.
Reconcile Room Status Discrepancies
- Discrepancies cause loss
of revenue, omissions and confusion.
- First housekeeper's
report is reconciled with room rack.
- Then, room rack is
tallied with folios.
- The evening shift does
this work to save time and resolve guest problems.
Verify Room Rates
- Verify discounts/
complimentary etc.
- If rate charged are less
than Rack Rates, then:
a) Are the rates discounted? Is the Discount correct?
b) Are there two guests on sharing basis? Is there a second folio?
c) Is the complimentary room correctly authorized?
Balance all Departments
- First balance all
departments and then look for individual errors (within an out of balance
department).
- Revenue center provides
source documents and Front Office Accounts provides department
transaction information.
- If error is found, a
detailed audit needs to be done.
Verify No-Show reasons
- Checking Reservation
Racks for pending arrivals.
- Filing and posting
No-show charges. One has to be careful in this case. There may be a regular
guest /
corporate etc. A cancellation might not have been recorded.
Post Room Rates and Taxes
- After verifying post Room Rates and Taxes.
Prepare Reports
- The following are some of the reports prepared by the auditor -
a) Operations Reports
b) Sales summary
c) High Balance Reports
d) Detailed department reports and summary (for accounts
department)
Deposit Cash
- Sales summary and cash
deposits of points of sale are tallied.
- Checkouts tallied with
cash receipts.
- Cash is counted and
tallied with cash sheet/ cash book and sealed in an envelope for deposit in
accounts department.
Clear I Back Up System
- Clear up the total figures for the day and open fresh accounts for
next day.
a) Manual: Closing Balance of VTL is entered as Opening Balance
for the next day's VTL sheet.
b) Semi-Automated: Totals in machine are zeroed. A "Z-
Card" is used to verify zero balances in the
machine. It is submitted with Night Audit work.
c) Automated: System backs up the reports on various media e.g.
paper, DAT etc. Backup is Daily/
Weekly.
Distribute Reports
- Reports are selectively distributed because of their sensitive
nature.
VERIFYING THE NIGHT AUDIT
- Many types of posting, mathematical, and clerical errors can be
identified in night audit.
- Some of the errors are –
Pickup Errors
- In manual/
semi-automated systems, previous balance is entered (picked up) incorrectly.
- Can happen whenever a
posting is made to a folio.
- Difficulty to identify.
Transposition Errors
- The numbers related to
transaction are reversed. (eg. Rs. 645 to Rs. 654 )
- Easiest to identify.
Missing Folios
- In non or semi-automated
systems,
- Folio has been filed
incorrectly or removed from the folio bucket.
- May be because closing ‘A’
folio and not closing ‘B’ folio.
- When a folio is missing,
the night audit will not balance.
- In automated, folios are
stored electronically, no issue of missing folios.
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