A CPA auditing an electric utility wishes to determine whether all customers are being billed. The CPA's best direction of test is from the:
A)meter department records to the billing (sales)register.
B)billing (sales)register to the meter department records.
C)accounts receivable ledger to the billing (sales)register.
D)billing (sales)register to the accounts receivable ledger.

Question

Quizplus · Accepted Answer

The most direct way to determine whether all customers are being billed is to trace from the source of the meter department records to the billing (sales) register, as this will provide assurance that all sales have been recorded and billed to customers. Tracing in the opposite direction (B) would not provide the same level of assurance, as it would only show that the meter department records match the billing register, but not necessarily that all customers have been billed. The accounts receivable ledger (C) is not necessary to test for completeness of billing, as it only reflects amounts owed by customers that have already been billed. Tracing from the billing (sales) register to the accounts receivable ledger (D) would only confirm that bills have been recorded as accounts receivable, but would not provide direct evidence that all customers have been billed.

A CPA Auditing an Electric Utility Wishes to Determine Whether