Question

An auditor needs to determine whether all customers of an electric utility company are being billed. The auditor should test from the:

A) sales register to the accounts receivable ledger.
B) sales register to the meter department records.
C) accounts receivable ledger to the sales register.
D) meter department records to the sales register.

Answer 1

The auditor should test from the meter department records to the sales register to ensure that all electric utility consumptions are being billed. This testing approach verifies the accurate transfer of meter readings into billed amounts.

Step-by-step explanation:

The question presents a scenario where an auditor must verify that all customers of an electric utility company are being billed appropriately. To ensure complete billing of customers, the auditor should undertake a tracing process from the meter department records to the sales register. This approach ensures that every consumption recorded by the meter department is accounted for and billed in the sales register.

Testing from the meter department records to the sales register is the correct answer because it corresponds to tracing the source of a transaction (the usage of electricity as recorded by the meters) to its recognition as revenue (the billing in the sales register).