Question

In connection with a recurring examination of the financial statements of the Louis Manufacturing Company for the year ended December 31, you have been assigned the audit of the fixed assets accounts (Manufacturing Equipment, Manufacturing Equipment—Accumulated Depreciation, and Repairs to Manufacturing Equipment). Your review of Louis’s policies and procedures has disclosed the following pertinent information:
1. The Manufacturing Equipment account includes the net invoice price plus related freight and installation costs for all of the equipment in Louis’s manufacturing plant.
2. The Manufacturing Equipment—Accumulated Depreciation accounts are supported by a subsidiary ledger, which shows the cost and accumulated depreciation for each piece of equipment.
3. An annual budget for capital expenditures of $1000 or more is prepared by the executive committee and approved by the board of directors. Capital expenditures over $1000 that are not included in this budget must be approved by the board of directors, and variations of 20% or more must be explained to the board. Approval by the supervisor of production is required for capital expenditures under $1000.
4. Company employees handle installation, removal, repair, and rebuilding of the machinery.
Work orders are prepared for these activities and are subject to the same budgetary control as other expenditures. Work orders are not required for external expenditures.

Required:
a. Prepare a list of the major specific objectives (assertions) for your audit of the Manufacturing Equipment, Manufacturing Equipment—Accumulated Depreciation, and Repairs of Manufacturing Equipment accounts. Do not include in this listing the auditing procedures designed to accomplish these objectives.
b. Prepare the portion of your audit program applicable to the review of current-year additions to the Manufacturing Equipment account.



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  • CreatedJanuary 09, 2015
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