In the course of audit of Growth Ltd. you want to review the internal control in the area of sales return. Mention the aspects which are to be specifically looked into to ascertain its soundness.

Review of sales and distribution function is very important from internal control point of view and it requires a detailed understanding of company business. The following aspects should be looked into to ascertain its soundness while reviewing sales return: Is the mechanism of schedule of authority exist for the sales return i.e. system relating to sale returns prescribe limits on the authority of managers at various levels to accept return of goods? Are sale return analyzed with reference to the reason & necessary actions taken viz-a-viz reasons identified? Are the returned goods inspected before acceptance? Are returned goods duly accounted in inventory records? Is an inward return note prepared promptly against each sale return, indicating the quantity and specifications of the goods received back? Whether credit note are issued on the basis of inward returned note. Whether a proper control over the issue of credit notes especially with regard to the authority for issuing the same. Whether credit notes are properly checked with reference to the relevant inward return note before it is approved and sent to the customer? Are appropriate entries made in the books of account promptly? Check whether the excise paid is reversed for the returned goods or not? Is the sale commission paid in respect of goods returned recovered through an appropriate debit note?