Auditing Audit of Hospitals – tryspring

By | July 13, 2019

Auditing – Audit of Hospitals

Maintenance of Accounts of Hospitals

Being non-profit organizations, hospitals prepare Receipt &
Payment account, Income & Expenditure account and Balance
Sheet; following are various items that fall under income and
expenditure in the hospitals.

Main Items of Income

  • Room Rent
  • Medical Care
  • Dentistry Charges
  • Delivery Room Charges
  • Anesthesia Charges
  • Laboratory Charges
  • Grants for Operating Needs of Hospital
  • Grants for Fixed Assets
  • Donations
  • Miscellaneous Income
  • Interest on Investments
  • Fees from Nursing Training School
  • Bed Charges
  • Operating Room Charges
  • X-ray Charges
  • Pharmacy Charges
  • Physiotherapy Charges

Types of Expenses/ Payments

  • Electricity & Water Charges
  • Pharmacy Charges
  • Salaries and Wages
  • Pharmacy Expenses
  • Building Repair & Maintenance
  • Laundry Charges
  • Rent for Nursing Hostel Accommodation (In case of rented
  • Telephone Expenses
  • Laboratory Expenses
  • Surgery Expenses
  • Operation Tools and Equipment Expenses
  • Depreciation

Preliminary Audit of Hospitals

An Auditor should follow the below mentioned procedure while
conducting Audit of a hospital −

  • He should obtain a list of books, documents, register and
    other records as maintained by the Hospitals.

  • He should examine the audit report of last year and should
    note down qualifications, if any.

  • He should examine the system of receiving grants and
    donations, whether received through cheque or otherwise.

  • According to the overall objectives of audit, he should
    examine the scope of responsibilities.

  • He should note down the important clause of Trust Deed or
    Charter, which may affect the audit and accounts of

  • He should examine the Minutes of Meetings of the Board of
    Directors/Trustees or the Managing Committee. He should note
    down the important decisions concerning the financial
    transactions relating to fixed assets, investment and
    financial powers as required by him during his audit.

  • He should examine the internal control system regarding
    purchase of fixed assets, medicines, stores, consumables,
    clothing and provisions, etc.

  • He should examine the internal control system for recording
    of purchases, issue and storage of all items and physical
    verification of them.

  • He should obtain the rate structure for fees, medicine and
    other services, power to do concession or waiver of fees.
    There should be adequate system for charges and waiver.

  • He should calculate and examine the input-output ratios.

Audit of Expenses of Hospitals

Vouching of expenses in hospitals is almost the same as in other
organizations; however, the following points need to be
considered by an Auditor are given below −

  • An Auditor should adopt the usual way to vouch purchases and
    other expenses of the hospitals.

  • Clear distinction should be made between capital and revenue

  • Salary of staff should be vouched according to general
    auditing principles.

Audit of Assets and Liabilities of Hospitals

The Auditor should consider the following points and carefully
examine the assets and liabilities of the Hospitals −

  • Title documents and other records relating to land and
    building should be carefully examined by the Auditor.

  • Resolution of Trustees/Managing committee should be verified
    for sale and purchase of fixed assets.

  • Depreciation should be charged on the basis of the policies
    of the Managing Committee.

  • Liabilities should be verified in the usual manner.

  • An Auditor should physically verify the investments like
    shares, debentures, bonds and security certificates. He
    should also verify them with the investment register.

  • Stock and stores of medicines, clothing, consumables, etc.
    should be physically verified at the end of the year.

Audit of Income of Hospitals

An Auditor should consider the following points and carefully
examine the income/receipts of the hospitals −

  • An Auditor should check the bill book, bill register and copy
    of bills.

  • It should be verified that bills are prepared properly
    according to visit charges of doctors, medicine, stay
    charges, room rent, etc.

  • Bills should be verified with the fees/charges structure.

  • Concession and waiver on account of fees and other charges
    should be verified.

  • Bills should be verified with cash receipt book, counterfoil
    of receipts and cash book.

  • Verification of arrears of bills should be done.

  • Unrecoverable arrears should be written off with the approval
    and consent of proper authority.

  • Rental income should be properly verified. He should properly
    vouch property register, arrear of rent, advance rent and
    provisions for the same.

  • Interest and dividend income should be verified with
    investment register, cash book and share warrants, etc.

  • Documents and correspondence relating to donations and grants
    should be verified; the list of donors, grant sanction letter
    should be obtained to verify the same.

  • Unutilized grant should be verified at the end of the year.
    In case of non-fulfillment of conditions, grant will be taken
    back by the authority.

  • Distinction between revenue and capital donation should be
    checked and verified. In case donation is for some specific
    purpose, the Auditor should assure that the money is used for
    the same purpose only.

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