Gm: Running on Empty? - Solutions Essay example

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GM: Running On Empty? 1. The sign of GM’s impending financial distress is first seen in 2005. GM reported a net loss of more than $10 billion and has continued to post annual losses since that time with losses reaching almost $31 billion in 2008. GM's cash flow from operations in 2005 was a negative $16.8 billion. Reviewing GM’s stock price, we can see that the stock price also decreased dramatically started in 2004 to 2008. In 2005, GM’s stock traded around $19 per share and reached the lowest of $1.45 per share on March 2009. 2. Auditors are required to consider evidence obtained and accumulated throughout the audit and make an overall evaluation as to whether substantial doubt exists with respect to the ability of the client…show more content…
I believe that Deloitte & Touche should have issued a going-concern opinion prior to 2008. The sign of GM’s impending financial distress is first seen in 2005. GM reported a net loss of more than $10 billion and has continued to post annual losses since that time with losses reaching almost $31 billion in 2008. GM's cash flow from operations in 2005 was a negative $16.8 billion. Reviewing GM’s stock price, we can see that the stock price also decreased dramatically. 4. A number of economic factors in the United States during 2008 might have accelerated Deloitte & Touche’s decision to issue an audit opinion modified to disclose going-concern uncertainties. Chief among the many factors was a dramatic change in the ability to create new lines of credit, which dried up the flow of money and slowed new economic growth and the buying and selling of assets. There were other factors as well, including the cheap credit which made it too easy for people to buy houses or make other investments based on pure speculation. Cheap credit created more money in the system and people wanted to spend that money. The housing market decline also caused a chain reaction in the economy. Individuals and investors could no longer sell their homes for a quick profit causing massive losses in mortgage backed securities and many banks and investment firms began bleeding money. 5. In my
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