In handing down his 22-page review, Auditor-General Peter Achterstraat said he could find "no major issue" with the state government's $25 billion proposal.
However, he stressed he was not asked to form a view as to whether the sell-off should occur, saying that was a matter for parliament.
Achterstraat said the government should set a reserve price for each asset before it began the process of selling or leasing the power retailers and generators.
He also recommended selling individual retailers at the same time as offering leases for power generators to attract firms which want to buy into both.
Iemma said that overall the report was a "stunning endorsement" of his government's plans, saying it was the fourth report which backed the proposal.
But the auditor-general's findings have largely failed to convince a number of his own MPs or the unions to reverse their opposition to the sell-off.
The premier on Thursday said he would be willing to recall parliament from its winter recess before the scheduled date of September 23 in order to push through legislation enabling the sale.
The move would pressure Opposition Leader Barry O'Farrell into taking a position on electricity privatisation, with the coalition on Thursday only stating it would consider the report.
But, business groups called on O'Farrell to finally pledge support, with the Alliance for NSW Future saying this was the fourth report to back the privatisation plan.
"There's no wriggle room left for the doubters," Sydney Chamber of Commerce executive director Patricia Forsythe told reporters.
"The parliament of NSW has a clear responsibility to the people of NSW to pass the legislation to ensure the economy of NSW is on a firm footing for the future."
Iemma is likely to need opposition support to ensure the privatisation legislation passes through parliament, with a number of Labor MPs still threatening to cross the floor.
Coogee MP Paul Pearce said the auditor-general's report was by "no means a big tick" for the sale, saying the terms of reference were very narrow.
"I think it's highly unlikely (dissenting ALP MPs) will change their position," he told reporters.
The other key opponent, Unions NSW, said Thursday's report was irrelevant because the government had no mandate to privatise the electricity industry.
Unions NSW secretary John Robertson said the report made no reference as to whether it was "a good or bad thing" for the state's residents.
"This battle will continue until such time as the government withdraws these proposals from the parliament," Robertson said.
The auditor-general found the protections put in place for workers and consumers were consistent with those offered when other states privatised their electricity sector.
The exception was the five-year employment guarantee offered to power generator workers, which Achterstraat said exceeded those in other states which generally offered between a year to three years.
The proposal would see retailers Energy Australia and Country Energy sold and generators Delta Electricity and Macquarie Generation leased out in long term agreements.
A public share offering of a combined entity consisting of Integral Energy and generator Eraring Energy is expected to generate $10 billion, while the government says it will save $15 billion in the cost of a new generator needed by 2014.
