General Motors has generally been considered to be an ethical company that was hit hard by current economic events and the culmination of bad management decisions leading up to the current environment.

Required
a. General Motors received an audit opinion that its internal controls were effective in its 2004 annual report. Yet, there appears to have been problems in the control environment. The fundamental question is: Short of finding misstatements, is the external auditor capable of objectively assessing the control environment? For example, consider that the chair of the audit committee at the time the misstatements were revealed was Phil Lackaday, the former managing partner of Ernst & Young. Be prepared to support your answer.
b. If the reports on internal control failed to identify the control problems at General Motors, many cynics might state that the additional cost of the controls are not worth the benefit derived from them.
1. Explain how an integrated audit should have detected the control deficiencies and the accounting misstatements. Be explicit in the procedures that should have been used.
2. Respond positively or negatively to the cynic’s statement:“Reports on internal control are not a good investment by users of financial statements because they cost too much and deliver too little.”
c. Identify the implications of General Motors’ restatements on what the large public accounting firms should be doing to better prepare you to perform the integrated audits. In other words, what training would you recommend specifically for the auditors of General Motors?