Hardware Manufacturing Company Pty Ltd, a small private company, has operated since 20X2 but hasn't had its financial statements audited. The company now plans to issue additional shares to be sold to outsiders and wishes to engage you to audit its transactions and render an opinion on the financial statements for the year ended 30 June 20X9.

The company has expanded from one plant to three and has often acquired, modified and disposed of all types of equipment. Fixed assets have a net book value of 70% of total assets and consist of land and buildings, diversified machinery and equipment, and furniture and fixtures. Some property was acquired by donation from shareholders. Depreciation was recorded by several methods using various estimated lives.

REQUIRED

a. May you confine your audit solely to transactions during the year ended 30 June 20X9, as requested by this prospective client whose financial statements have not previously been audited? Why/why not?

b. Prepare an audit program for the 1 July 20X8 opening balances of the land, building and equipment and accumulated depreciation accounts of Hardware Manufacturing Company. You need not include tests of year ended 30 June 20X9 transactions in your program.