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For audit procedures for revenue, there is a pint “inspect credit notes issued after the year end, trace to GDN and sales invoice and make sure that sale has been reversed:occurence”. In this point..is it so that the sales returns which took place after the year end ..which were included in revenue in FS for the year end..will be removed from revenue?
Yes – a company could inflate revenue by sending out goods immediately before the year, which the customer returns immediately after the year end.
Note that as well as reversing the sale (and trade receivable), the goods returned would have to be included in the valuation of year-end inventory (otherwise cost of goods would be overstated).
Ok sir ..but what about sales return taking place after the financial statements have been issued ..? Are they adjusted ? Or its just about those sales which are returned immediately after the year end..?
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