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1.How would you audit the automobile revenues (say $100 billion) of General Motors?

Let’s say that each car and truck has an invoice on the window and in GM’s computer system, and that 8 million cars and trucks were sold.

Then, how many invoices out of 8 million should you want to examine (audit) in order to verify the $100 billion of revenues in the financial statements? So, you, as the auditor, would feel “comfortable” to sign the auditor’s report (issuing your professional opinion as the auditor) attached to the GM’s annual report to shareholders.

Please reply with your first instinct or “gut-feeling” and share your thoughts popped up with the rest of our colleagues in class.

2.

Auditor as Guarantor / insurance provider?

Scenario:

Your neighbor Jim invited you to lunch yesterday. He knew previously that you are taking Auditing and Assurance course at De Anza College. Sure enough, it was no “free lunch” because Jim wanted to discuss the annual report of Foothill Corporation. He owns Foothill stock and just received the annual report. Jim says, “our auditors prepared the audited financial statements and gave an Unqualified opinion, so my investment must be safe.”

Required discussion question:

What misconceptions does Jim seem to have about the auditor’s role with respect to Foothill Corporation?

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