The CGA firm that you work for has audited AAA Manufacturing for several years, although this is your first year to be assigned to the audit. In familiarizing yourself with the client, you note 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 percent 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 firm's working papers for the client includes a note that AAA tends to replace its equipment long before it is worn out, in the belief that newer equipment will have lower 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 fixed assets.
(b) Design an audit program to verify the management assertions of completeness and ownership for AAA's fixed assets. Include three procedures for each assertion, not including sample selection, and explain how the evidence that your procedures provide would relate to the assertion being tested.