Credit memos are created when a product is returned. A debit to Sales Returns and Allowances and a credit to Accounts Receivable (A/R) is recorded when a credit memo is created. A credit memo will reduce A/R and write off the invoice. You have noticed that the A/R clerk has created an abnormally high number of credit memos. You notice the inventory does not reflect the additional inventory resulting from the Sales Returns and Allowances. What could be happening, and what will you do?
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