** I have tried adding the screenshots of the textbook problem again. If they do not upload correctly is there another way to do it? This question has been asked and answered before.

Chapter 11 Case: GM Running on Empty? (1-6)

1.Reviewing GM's financial information in GM Exhibit 1 and its stock price in GM Exhibit 2, when do you first see signs of GM's impending financial distress?

2.In referencing professional standards, what factors should auditors consider in evaluating potential going-concern uncertainties?

3.Considering your response to questions 1 and 2, do you believe that the going-concern uncertainty was warranted? Do you believe that Deloitte & Touche should have issued a going-concern opinion prior to 2008?

4.What economic factors existing in the United States during 2008 might have accelerated Deloitte & Touche's decision to issue an audit opinion modified to disclose going-concern uncertainties?

5.Do you believe that the evens immediately following GM's bankruptcy alleviated the concerns that led to the issuance of the going-concern uncertainty? What issues would auditors need to consider in evaluation the ability of General Motors Co. (the new GM) to continue as a going concern?

6.Many companies believe that a going-concern opinion is a self-fulfilling prophecy (i.e., when a company receives a going-concern opinion, customers will not purchase products with warranties, suppliers will not provide short-term credit and investors and creditors will not invest or loan). Would GM's going-concern opinion influence your decisions regarding either purchasing a car form GM or investing in GM's stock? Is a going- concern a self-fulfilling prophecy?

GM: Running on Empty? Founded in 1908. General Motors Corp. (GM) is truly an iconic American corporation. From 1931 through 2008, GM was the world's largest automobile manufacturer, and in 1955. it became the first company in any industry to report more than $1 billion in revenues. GM's market share peaked at 51 percent in 1962. GM's domination in the market was such that many recommended the company be subject to scrutiny under antitrust laws. In 1971. former President Lyndon Johnson made the statement "now what's good for General Motors really is good for America."! GM's net income reached an all-time high of $6.7 billion in 1997, and the automaker continued to generate positive net income through 2004. In 2005, things began to change. GM reported a net loss of more than $10 billion and continued to post losses through 2008, with a loss of almost $31 billion in that year. (GM's cash flow from operations in 2008 was a negative $12 billion.) A summary of various measures of GM's financial condition for the six-year period from 2003 through 2008 is presented in GM Exhibit 1 0 .2 GM EXHIBIT 1 Summary of Financial Information: General Motors Corp. (amounts in millions) 2003 2004 2005 2006 2007 2008 Total assets $448,507 $479.603 $476,078 $186,192 $148,883 $91,047 Stockholders equity 25,268 27,726 14,597 (5,441) (37,094) (86.154) Revenues 182,543 193,571 192,605 207,349 181,112 148,979 Operating income 2,862 12,081 (16,931) (7,668) (4,390) (21.284) Net income 3,822 2,805 (10,567) (1,978) (38,732) (30.860) Cash flow from operations 7,600 13,061 (16,856) (11,759) 7,731 (12.065) Source: General Motors Corp. 2003-2008 10-K reports. Because of concerns with the ultimate impact of GM's financial struggles on the world economy, GM received $13.4 billion in government loans in December 2008. President Barack Obama's administration pledged interim financing to allow GM to develop a restructuring plan, requested then-CEO Rick Wagoner to resign, and announced a plan to replace at least 6 of the 12 members of GM's board of directors. All of these events occurred in a market in which the economic conditions sharply decreased demand for automobile purchases. Not surprisingly, GM's stock reached a low (at that time) of $0.75 per share on May 29. 2009 (for comparison, GM's stock traded between $27 per share and $94 per share from 1983 to 2004). GM's high, low, and closing stock prices for the period 2003-2008 are summarized in GM Exhibit 2 9. GM EXHIBIT 2 Annual High, Low, and Closing Stock Prices: General Motors Corp. $60.00 $50.00 $40.00 $30.00 Close $20.00 - High $10.00 -LOW $0.00 2003 2004 2005 2006 2007 2008 Source: Wharton Research Data Services