INSTITUTE OF HOTEL MANAGEMENT CATERING & NUTRITION, PUSA.NEW DELHI.

NIGHT AUDITING

Night Auditing is the process of verifying and proving the accuracy and completeness of
guest and non-guest accounts with departmental activity reports. This function is generally
done by a senior accountant who works as night auditor.
The front office night audit focuses on two areas:
(1) The discovery and correction of front office accounting errors.
(2) The creation of accounting and management reports.
From an accounting point of view, a night audit ensures the integrity of front office
accounts through a cross-referencing process. Guest and non-guest accounts are compared
with data entries and source documents from revenue centers to prove individual
transaction entries and account totals.
Discrepancies found during a front office audit must be corrected so that the front office
accounting system is in balance. From a management reporting point of view, the front
office audit provides important operating information, such as average rate, revenue per
available room (RevPAR), occupancy percentage, usage of package plans and other
marketing programs, and the number of group rooms and complimentary (no-charge) rooms
occupied.
Since hotels work round the clock, the auditing process in the hotel is done during the
night and hence it is called NIGHT AUDITING. This also helps as most of the outlets are
closed or have low business during night hours.
The average time of a night auditor’s working is from 2300 hours to 0800 hours. Usually
the night audit begins around 0100 AM. The time taken to complete the audit is called as
Audit Work Time. Any transactions that happen during this period are usually posted in the
next business day.

NIGHT AUDITOR
 A night auditor is the person who audits the hotel accounts daily at night or at a time when
the business is relatively slow.
 As a night auditor one has to work in the night shift, the position doesn’t find many takers,
so most of the hotels do not have a permanent team of night auditors.
 A night auditor should also possess the skills of a receptionist as in many small and
medium hotels, he may be required to carry out the check in and checkout function at
night.
 Night auditors monitor the current status of guest accounts vis a vis the credit limits, and
verify discounts, allowances, and promotional programs that are offered to the guests.

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 They prepare reports about the front office operation for the management.
 Fully automated hotels may not require a team of night auditors as most of the functions
(known as system updates) that a night auditor performs are carried out automatically by
the computerized system.

The main functions performed during night audit are –

1. Verification of postings
2. Resolving room status discrepancies
3. Monitoring credit limit
4. Verification of outlet sales and cash collection
5. Tallying and totaling of outlet sales and vouchers
6. Checking room rate variance report
7. Processing trial balance
8. Preparation of flash report and Manager’s report after the night audit
9. Checking and verification of allowances passed during the business day
10. Monitoring of credit limit of in-house guests

PURPOSE OF NIGHT AUDIT

 The main purpose of night auditing is to inform the management about the total amount of
revenue generated on a day and producing operations and managerial reports.
 The flash report helps the accounts department to compile a more extensive daily report for
posting to the general ledger
 An effective night auditing increases the probability of correct account settlement and
avoids disputes with the guests
 It also verifies the postings in non-guest accounts, monitors credit limits, balance all front
office accounts and sorts out any room status discrepancies.

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 INSTITUTE OF HOTEL MANAGEMENT CATERING & NUTRITION, PUSA.NEW DELHI.

AUDIT POSTING FORMULA

The basic audit formula is as follows –

Previous Balance ( PB) + Debits ( DR ) – Credits ( CR) = Net Outstanding Balance
(NOB)

PB + charges – Payments Received = NOB

 Suppose a guest has Rs 20000 as his previous balance on a particular day. On
that day he has availed services and facilities worth Rs 3000, and made payment
of Rs 15000 at Front Office. At the end of the day the net outstanding balance of
that account will be :
 Rs 20000 + Rs 3000 – Rs 15000 = Rs 8000

ACCOUNT INTEGRITY

Internal control helps to perform audit job accurately. It is an internal control that no
single person should be responsible then mistake won’t be detected. That is why
auditing is not done by the person who posts various transaction. The audit process is
complete when the totals for guest, non- guest and department accounts are proven
correct all are in balance. Auditing is considered incomplete as long as it presents an
out of balance position.

GUEST CREDIT MONITORING

The credit monitoring depends on factors like floor limit, house limit, reputation of
guest and status of a guest as a potential credit risk. At the close of each accounting day,
the night auditor should identify those accounts that have reached or crossed the credit
limits. These accounts are called High Balance Accounts. A report listing these is
called High Balance Report.

Functions and Responsibilities of Night Auditor –

1. Post All Pending Entries – The first task that night auditor performs is to check for all
postings that are pending. The pending postings are verified with thecorresponding vouchers
and posted accordingly in the respective folio.

2. Verifying Correctness of Entries – One of the most important functions of night auditor is
to verify all the postings done in guest and non-guest accounts. He has to ensure that the
bills have been correctly totaled and posted.

3. Reconciliation of Discrepancies – The night auditor also keeps a check on the room
status discrepancy report that is provided by the Housekeeping to Front Office. They have
to look for any discrepancy mentioned by either department and have to ensure that the
same is rectified before the audit process is started.

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4. Balancing & Totaling of Accounts – The night auditor balances and totals all accounts. He
records the total sales under various heads like food, beverage, liquor, tobacco, room, health
club etc. This process helps the auditor to verify the correctness of accounts.

5. Monitor Guest Credit Limit – The night auditor runs through all the resident guest folios
and checks them for their outstanding balance. He has to ensure that none of the guest
accounts are exceeding the credit limit of the hotel. In case any account is over the credit
limit, he informs the night manager so that due actions can be taken.

6. Verifying No-Shows – All guests holding confirmed reservations but did not show up are
to be charged retention. The night auditor must ensure that the reservations have been made
for the correct date by checking the reservation correspondence.

7. Reconciles Non-Guest Account – The accounts of all the guests who have checked-out and
all accounts which have been transferred to city ledger are checked by the night auditor. Any
discrepancy has to be rectified before the audit process is taken further.

8. Checking and Tallying of EDC Machines – The night auditor takes out reports from the
EDC machine and tallies them against all the credit card and debit card payments that have
been done during the day. They also verify if the postings have been done under the correct
head on the system (for automatic system) and the corresponding charge-slips are attached
to the folio.
9. Check Cash Book, Cash Sheet and Receipt Book – The night auditor may or may not
check the cash books of the front office cashier. He may also check the cash books and the
receipt books to verify the cash transactions that have taken place during a certain time
period.

10. Additional Work as Cashier – In small hotels, a night auditor may also perform the
cashier apart from performing his regular duties.

11. Preparing Occupancy Report – The night auditor also prepares the occupancy report along
with the flash report. Although the occupancy report preparation is responsibility of front
office, in some cases, the night auditor may be in-charge of preparation of these reports.

12. Post Room Rate & Taxes – The night auditor is responsible for posting of room charges
and taxes in individual guest accounts. This is done after the room rate variance report is
checked by the night duty manager and all the room rates are verified by him.
13. Back Up Systems – The night auditor is also responsible for taking back up on
systems so that the data may be retrieved at a later stage.

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AUDIT PROCEDURE
The night audit process may vary depending upon the systems being employed and the
management policy. However, the basic process remains the same.

Non-Automated
This process involves a lot of time and attention as all the journals and entries have to be
checked manually by the night auditor. Most large hotels do not follow this process as it is
practically impossible to run through all the postings on a manual basis. This process is
usually done by small hotels and involves the use of four forms –
a) Daily and Supplementary Transcripts – for guest and non-guest accounts
b) Guest and Non-guest folio
c) Front Office Cash Sheet
d) Audit Recapitulation Sheet

Semi-Automated
 The semi-automated process is not only time saving as compared non-automated
process but is also more accurate.
 The cashier has to post entry once in the guest weekly bill and the machine
automatically posts the entries to day book/ VTL. These machines are however,
capable of producing a limited number of department total; they may or may not
interface with POS systems or retain folio balances
 Many electronic machines can store previous account balance which helps to eliminate
‘pickup error.
 In semi automatic system, the amount of each posted charge is added to the running
departmental for department originating the posting.
 Departmental totals are helpful in end of work reporting. Forms produced in semi-
automated systems are –
a) Front Office Cash Report
b) Night Audit Summary Report (D-Card) – It shows the opening balance of system, provides
a running record of all charges and credits postings through the machine and shows the
final balance.

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Fully Automated
 This is a quick, reliable and very accurate system in which all postings can be done through
the system.
 A fully automated system can be interfaced with the POS, telephone interface and call
accounting system as well which enables the system to post all the charges directly to the
guest or non-guest account.
 Monitoring of account balances and verification of postings is simple.
 This system allows the night auditor to physically check all the vouchers and checks for any
fraud or posting error that may have been done by the respective departments.
 Many computer based front office systems can perform the audit process without
effecting the usual operations and the terminals have to be logged out for 5-10 minutes
only to enable the date change process.
 The systems are also capable of generating the reports automatically which saves time
for the night auditor.

NIGHT AUDIT PROCESS

1. Establishing the end of the day: The end of the day is the arbitrary time that is supposed
to be the end of financial transaction for a particular day. This time is generally
established by the night auditor. The time when the night auditing begins is usually taken
to be the end of the day which means that all the transactions that take place after the
commencement of night auditing are taken to be the next days business.
2. Completing outstanding postings and verifying transactions: Once the end of the day is
established, the first step to complete the postings of all pending charges (room and tax) in
proper account folios. An efficient front office accounting system ensures the prompt
posting of financial transactions as they occur and reach the front desk cash and bill
section. The transactions should appear in the guest folio in order of their occurrence. The
night auditor posts all outstanding charges properly at the commencement of night audit
process. The night auditor physically verifies all finance
3. All transactions by cross examining the account with supporting vouchers like credit
vouchers, debit vouchers, visitors paid out vouchers, allowance vouchers etc. The night
auditor should catch the mistakes and correct it, saving the hotel from a lot of
embarrassment and from the trouble of amending many records. The night auditor verifies
posting in all the accounts by going through all the documents carefully.

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They also validate the discounts given to the guests. They examine and authenticate all the
transactions that involve monetary elements.
4. Reconciling transactions: The next step is the reconciliation of each financial
transactions with the original source documents (generally vouchers) The
reconciliation of accounts may be carried out in the following sections naming Guest
accounts, City accounts, Point of sale.
5. Verifying no shows: The night auditor also verifies no shows. A no show is a situation
when a guest with a confirmed reservation does not arrive at the hotel on the date of
arrival without any prior intimation about the cancellation. The night auditor verifies all
these no shows and in the case of guaranteed reservation and posts the no show in the
guest’s folio. Usually, hotels charge one-night retention for no shows. The night auditor
should verify carefully that the reservation was guaranteed and that the guest has not
registered and that it was not a duplicate reservation.
6. Balance All Departments: The Night Auditor balances all revenue producing departments
using source documents. He balances all Front Office accounts against departmental
transaction information. Vouchers received at Front Desk are totalled and compared with
departmental sales summaries. When the Front Office accounting system is out of balance
, the correctness and thoroughness of accounting posting must be investigated. A detailed
department audit is conducted and individual posting reviewed until the Front Office
account error is corrected.

7. Preparing reports: The next step of the night auditor is to prepare daily reports for
managerial use which help the management to review the profitability of hotel operations
and plan future goals. In fully automated hotels , these reports are automatically prepared
by the system. Reports like
1. High balance report, 2. Occupancy report, are prepared by the night auditor,
3.Expected VIP arrival report, 4. Expected VIP departure report, etc.

8 Deposit Cash: The Night Auditor prepares a cash deposit voucher as apart of the night
audit process. He compares the posting of cash payments and paid- outs with actual
cash in hand. (Cash payment – paid outs = Cash in hands)

9 Updating the system: Once the outstanding charges have been posted and reconciled , no
shows have been verified and reports and summaries for the management have been
prepared , the night auditor updates the system and ends the night audit process.
Thus the night auditor establishes the end of the day, takes stock, checks if the charges have
been posted properly, and reconciles all the financial transactions of the day between the
hotel and the guests. The night auditor is also known as the in house auditor who is
responsible for conducting audits and generating reports for the management, which
includes High balance report, occupancy percentage report, like house count, bed occupancy
report, domestic occupancy percentage, and foreigners occupancy percentage report.

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DAILY AND SUPPLIMENTAL TRANSCRIPT

A daily transcript (Visitor Tabular Ledger , VTL or Guest Ledger Transcript , GLT ) is
used as a detailed report of all guest account. It indicates those guests’ accounts that had
some transactional activity during the day. A supplemental transcript is used to record
day’s transactional activity for non- guest accounts. Together, the daily and
supplemental transcripts detail all transaction of the day.

Visitor Tabular Ledger

Date: _

Room No. 201 202 203 204 205 Total

Name Mr A Mr B Mr C Mr D Mr E
No. of person
GR no
Arrival time
Departure Time
Room Rate
Plan
Breakfast
Lunch
Tea/ Coffee
Dinner
Snacks
Soft Drinks
Alcoholic
Beverages
Tobacco
Telephone
Laundry
VPO
Miscellaneous
Daily Total
Balance B/F Dr
Cr
Grand Total
Dr
Cr
(Less) Deposit
(cash)
Allowance
Ledger
Transfer
Balance C/F
Dr
Cr
Total
Dr
Cr
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B.Sc. HHA, Sem3 Page 19

L-5 Night Auditing September 2018