Audit of Electric Supply Company

The main role of electric supply company is to ensure that electric switchgears, controls and other fitting and lighting tools and merchandise are supplied at wholesale.

The operations of such companies require high degree of financial discipline as to ensure that the transactions are regularly noted and maintained. Timely and regular assessments of such companies are of utmost important.

It is the role of an auditor to examine the accounts and related record of an electric supply company.

To be maintained by Electric Supply Company:

  • Tabular ledger of consumers with record of name, address, power consumed and other important updates.
  • Documents/bills issued to consumers of electricity.
  • Record of payment of wages, electricity charges etc to other party.
  • A separate cash book having record of all receipt and payments.
  • In case of receipt of cash, same shall be deposited in the bank account of electricity supply company.
  • Bank reconciliation to be done every month.
  • Arrear of bills should be accounted in proper head/ledger.
  • Electricity supply company should verify receipt of late payment charges in cases where late deposit of bills is deposited.
  • Personnel of an electricity supply company should be well thorough with the provisions of Electricity (Supply) Act, 1948 and the Indian Electricity Act, 1910. They should ensure proper compliance of rules and bylaws.

Role of an auditor in an Electric Supply Company;

  • An auditor should examine the system related to the internal control of the company, whether records are properly maintained for raising invoices, bills and collection of bills, collection of debts are accurately recorded or not.
  • An auditor should also be well aware of the payment made to the departments, payment made to the employees of the company.
  • He should physically do a random sample check of record of sale of power and electricity to consumers and therefore if any improvement is required, he should inform the board about the same.
  • He should examine the sale of power, total numbers of bill generated, total payment received on account of bills generated and payment due to be received.
  • An auditor should conduct audit in accordance with auditing standard, should examine, on a test basis, evidence supporting the amount and disclosures in financial statements.
  • Auditor should check vouching of payment for transformers, meters, sub-power stations, and such expenses should be treated as revenue expenditures.

Thus an auditor should ensure that the mentioned points are well checked and verified, thereafter provide accurate and fair view in the financial statements of the company.


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