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.

Related Post

What are Impersonal Ledgers? | How are they vouched? What are Impersonal ledgers? Impersonal ledgers are also called General Ledgers or Nominal Ledgers. They are of two types such as Nominal Accounts an...
Vouching Sales Ledger or Debtor’s Ledger | Guidelines to Auditors Vouching Sales Ledger or Debtors Ledger - Procedure, Guidelines to Auditor After having checked the Bought Ledger, the auditor should proceed to chec...
Vouching Sale of Fixed Asset, Royalties Received | Auditor Role Vouching Sale of Fixed Assets Vouching of Sale of fixed assets, Royalties Received An auditor has to verify the following documents while auditing ...
Vouching Payment of Income Tax & Sales Tax | Role of Auditor Role of an Auditor in vouching Payment of Income Tax Vouching Payment of Income Tax and Sales tax The auditor should verify whether it is advance t...
Vouching of Wages & Salaries | Audit Procedure | Guidelines to Auditor Vouching of Wages - Audit Procedure and Guidelines to Auditors The vouching of payment of wages is an important duty of an auditor. There are many ch...
Vouching of Receipt Side or Debit Side of Cash Book | Vouchers to be vouched Vouching of Receipt side or Debit side of Cash book The receipt side or the debit side of the cash book contains items such as opening balance, cash ...

Leave a Reply