How to Audit Different Business Sectors - hotels, club, hospital, trust, school, university, society

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Audits play a pivotal role in ensuring transparency, accuracy, and compliance with financial and regulatory standards. The audit procedures vary significantly across different sectors due to the unique nature of their operations. This article delves into the audit procedures for various industries, highlighting key considerations and special steps involved in the process.

1. Difference Between Operating and Finance Lease

The following table provides a comparative overview of operating and finance leases:

Aspect	Operating Lease	Finance Lease
Common Examples	Lease of projectors, computers, laptops, coffee dispensers	Lease of plant and machinery, land, office buildings
Ownership	Ownership remains with the lessor throughout the lease	Ownership transfer option available at the end of the lease period
Accounting Treatment	Treated as a renting arrangement	Treated like a loan arrangement
Purchase Option	No option to purchase the asset during the lease period	Option to purchase at less than fair market value
Lease Term	Typically less than 75% of the asset’s projected useful life	Generally equal to or more than the asset’s economic life
Operating/Running Costs	Lessee pays only the monthly lease payments; no additional costs	Lessee bears insurance, maintenance, and taxes
Tax Benefit	Considered an expense; no depreciation claimed	Both interest and depreciation can be claimed as financial lease is like a loan

2. Sector-Specific Audit Procedures

The audit procedures for various sectors involve specific steps and considerations. Below is a breakdown by industry:

Audit of Hotels

Area	Special Considerations
Internal Controls	Ensure robust controls for managing room sales, hall bookings, and inventories.
Fixed Assets	Regular verification of fixed assets.
Casual Labor	Proper documentation and verification.
Travel Agents & Shops	Audit financial dealings with associated entities.

Audit of Hospitals

Area	Special Steps
Cash Registers	Ensure accurate collection and documentation of cash.
Income from Investments	Audit income from investments, rent, and donations.
Budgets & TDS	Verify budgets and correct implementation of tax deductions at source (TDS).
Depreciation & Inventories	Monitor depreciation of medical equipment and inventory management.

Audit of Charitable Institutions

Area	Special Focus
Constitution & Donations	Examine general provisions, subscriptions, and donations.
Income & Expenditure	Verify sources of income, grants, legacies, and the correct allocation of expenditures.
Management Representation	Obtain certificates and representation from management.

Audit of Educational Institutions

Area	Special Considerations
Constitution & Compliance	Review constitutional provisions and ensure compliance with educational regulations.
Fees from Students	Verify collection and allocation of fees, donations, and other receipts.
Assets & Liabilities	Audit the institution’s assets, liabilities, and financial management practices.

Audit of Clubs

Area	Special Considerations
Subscriptions & Dues	Ensure accuracy of subscription records and management of dues.
Income & Expenditure	Verify income from entrance fees, subscriptions, and other sources.
Inventory & Management Powers	Review inventory records and ensure management adheres to powers granted by the constitution.

Audit of Sole Traders and Firms

Type	Key Considerations
Sole Traders	While not mandatory, many opt for audits for better financial management.
Firms	Auditors must verify partnership agreements, books of accounts, and tax provisions.

Audit of Hire Purchase and Leasing Companies

Area	Special Considerations
Hire Purchase Agreements	Ensure agreements are in writing, signed by all parties, and include critical details.
Leasing Procedures	Verify lease proposals, agreements, insurance policies, and board resolutions.

Audit of Cinemas

Area	Special Considerations
Internal Controls	Check internal control mechanisms for ticket sales and free passes.
Cash Book Entries	Verify entries and reconcile with daily statements.
Advertisement Revenue	Audit revenue from advertisements and ensure capital expenditure management.

Audit of Co-operative Societies

Area	Special Focus
Books and Records	Thorough audit of the books, accounts, and records of the society.
Loans and Borrowings	Verify restrictions on loans and borrowings.
Investment of Funds	Ensure correct appropriation of profits and reserve fund investments.

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