Tuesday February 1 2011
I posed the question in class, what is a material number if you are auditing Valero? Click there to see the last three year income statements for VLO. Note that in 2008 Gross Revenue from all sources was $119 Billion!
I asked you if one million would be a material number for that audit. Hmm, ten percent of gross would be okay let's round gross to 120 B so ten percent is 12 B and one percent is 1.2 billion. Gee still a big number. One tenth of one percent would be 120 million. 1.2 million would be one one hundredth of one percent. Hmm is that material?
See what I mean. Sure one million bucks in your bank account is material but maybe not for a company the size of VLO. And, these decisions need to be made before not during or worse, after the audit.
Professor Elam 
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