You are employed by a public accounting firm that has audited Kuhio Enterprises for several years. This is the first year you will be involved in performing the audit. To prepare for the audit, you have done some preliminary analysis of the financial statements and have noted that repairs and maintenance is one of the larger items on the income statement for this year and for prior years. It has increased by 10% this year, which is much more than the increase in other expenses. The dollar value of new equipment purchased in the audit year also increased. The permanent file kept in your firms working papers for the client includes a note that Kuhio tends to replace its equipment long before it is worn out, in the belief that newer equipment will have less repair costs and thus improve net profit.

Required

a. Identify the audit procedure you should use to obtain evidence for the existence assertion for the new capital assets.

b. Design an audit program to verify the management assertions of completeness and ownership for Kuhios capital assets. Include 3 procedures for each assertion, not including sample selection, and explain how the evidence that your procedures provide would relate to the assertion being tested.