Vouching of Purchase Returns | Guidelines for Auditors

Purchase returns

Sometimes, goods purchased are returned back to the suppliers for various reasons such as goods are not as per sample, inferior quality of the goods, etc.

In such cases, a credit note should be obtained if the price has been paid already whereas if the price is yet to be paid, a note to be sent to the cash department to send less amount to the seller. He should see that the credit note includes the amount which was originally included in the invoice. A separate Returns Book is to be maintained for recording the returns.

There should be proper system of internal control for ensuring that due credit is received in case of purchase returns. Otherwise, credit notes from suppliers might become easy instruments for misappropriation of funds.

Guidelines for Auditor in vouching of purchase returns

The auditor should examine the system of internal check in operation. If he is satisfied with the system of internal check, the auditor should proceed to vouch the Purchases Returns Book in the following manner:

1. The auditor should check whether a debit note has been sent to the supplier or credit note has been received from the supplier.

2. He should check that the quantity returned as per the return note corresponds with storekeeper’s record, Return Outward Register, and Gatekeeper’s Outward Register.

3. He should verify the amount shown in credit note.

4. Sometimes the profits of current year may be manipulated by recording current year’s purchases returns in the subsequent year. So the auditor should be careful about the recording of purchases returns in the current year.

5. He should vouch the purchases returns of the first month and last month of the accounting year carefully so as to detect any manipulation of amounts.

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