You are the audit senior on the audit of Great Eastern Hotel (GEH). This two-star hotel is located in a major coastal city and as such is prone to seasonal fluctuations. The 200 room hotel is open year round with a standard room rate of $90 per night. GEH charges $95 per room in the summer and $85 per room in the winter, the same as the prior year. The hotel includes a bar and restaurant as well as underground parking.
From the audit work performed to date, you are satisfied that GEH has well established controls. You therefore decide to place reliance on these controls and for the most part use only substantive analytical procedures to test revenue (Exhibit 1). You are satisfied that this approach will provide you with sufficient assurance on hotel room revenue. So far, you have obtained a breakdown of room rental revenue by quarter and gathered some statistics on occupancy rates from the local tourist board.

REQUIRED
a. Comment on the quality of information you have obtained so far, considering its source, audit assertions, and level of detail in your discussion.
b. What additional analytical procedures would you be required to perform in order to ensure the degree of precision necessary to provide adequate assurance for hotel room revenue?
c. Develop an expectation of GEH's rental revenue. Based upon this analysis, provide your conclusion on GEH's 2015 hotel revenue.
d. Based on your analysis and conclusion in part (b), describe what further inquiries you would make of GEH management and evidence you would request. Tie your discussion to specific audit assertion(s) you are concerned with.
e. Despite the well established controls at GEH and your decision to place reliance on them, is it appropriate to use only substantive analytical procedures to gain assurance over revenue accounts? Explain why.

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Great Eastern Hotels Statement of Income for the Year Ended December 31 Revenue: Hotel Room Rental Food & Beverage Parking. Telephone, Other Interest 2014 $5 165 176 1 488 619 396 158 2015 $5 535 617 1 497 612 417 602 56 711 $7 507 542 58 610 7 108 563 Expenses: Direct Costs: Hotel Room Rental Food & Beverage other 3 165 992 1388 691 389 917 $4 944 600 $2 462 942 617 532 364 817 216911 $2 199 260 $163 682 26 754 $236 928 3 105 644 1 452 107 365 223 $4 922 974 $2 185 589 1 574 805 349 576 166 978 $2 091 359 $94 230 40 519 $52 711 Gross Margn General & Administration Advertising & Promotion other Net Income Before Tax Income Tax Expense Net Income Q1 1 193 02 1AA½ 03 04 1 427 1 471 01 Summer 77% 76% 69% 2015 Hotel Occupancy Rates 02 Fall 75% 70% 74% 03 1ter 86% 84% 78% 04 Spring 71% 71% Two Star lillilは廊!