Our institution provides merchant credit services to local businesses. When I am conduting a Reg E audit do I need to look at the receipts they provide to their customers in order to determine compliance with section 205.9? What about the cash advances that are done on the teller line within the bank?

Be careful what you are responsible for. You have limited control over the receipts the merchants give. You could always make contact with these merchants as a value added service to them to make sure they are aware of the requriements. The goal of the audit should always be aligned with the goals of the bank. Keeping your merchants informed is good for the merchant and good for the bank.