Why Chrysler and General Motors received the opinion that the auditors issued (Term Paper Sample)

Accounting
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Why Chrysler and General Motors received the opinion that the auditors issued
Historical background
General Motors is an American company that specializes in manufacturing and assembly of automotive products throughout the world. The main operational branch is located in Michigan. Additionally, the company has got human personnel of more than two hundred thousand across the globe. The company was started in the wake of the twentieth century by William Durant. In addition, the company diversified over the years to become a multinational company. General Motors has got more than a hundred and fifty operational branches across the world. The company specializes in the manufacture of vehicles such as Chevrolet, Cadillac, Isuzu and Holden among other brands. The government of United States owns twenty seven percent of the shares in the company. Dan Akerson, the current manager, is implementing an effective product development plan that aims at sustaining the company profitability scale (Barofsky 33). This is to prevent the reoccurrence of the 2009 financial crisis in the company.
On the other hand, Chrysler Company also specializes in manufacture auto mobile products located in Michigan. The company was started in the year 1925 by Chrysler Walter and specializes in selling vehicles brands such as Jeep, Fiat, Dodge and Ram. The company experienced financial crisis in the year 2009, which necessitated the company to file for bankruptcy. Both General Motors and Chrysler were critically affected by the financial crisis in the year 2009. This forced the companies to sell some of the shares to the government in an effort to acquire operational revenues. The objective of the study is to evaluate why Chrysler and General Motors received the opinion that the auditors issued.
Circumstances that propagate the issuance of Auditor’s report
The company received financial audit that concentrated on the total rewards of the employees. The circumstance under which the report was issued was based on the increasing total expenditure of the company at the end of the accounting period. Therefore, the company conducts financial audit to evaluate the type and total expenses accrued in the company at the end of the accounting period. The main area of concern of the majority of the organizations is the implementation of total rewards among the workers. The report concentrated on total expenditure on salaries, compensation, training of workers and associated benefits. The basic factor of the audit was to evaluate the company income in relation to the total expenditure. The audit indicated that the company criteria in settling the total rewards among the employees were ineffective (Bunkley, 1). This is because the increasing rate of total rewards was not aligning with the productivity and profitability of the company. Therefore, the company incurred high expenditures that reduced the aspect of revenue generation. The audit report indicated that the company must balance the accounts through effective and efficient implementation of total rewards among the workers. The criteria advocated in the report stated that the company must implement total reward plan based on the experience, skills, duration of stay and productivity of the employees. The opinion of the auditors stipulated that total rewards must be implemented based on the aspect of the financial fair and play. This is aimed at reducing the aspect of bankruptcy and propagating diversification. Additionally, the number of human personnel must align with the productivity of the company.
Chrysler and General Motors Audit opinions
The two Michigan based automobile companies received auditors opinion on the financial management and product development strategy. This is because both companies had undergone financial crisis between the years 2008 to 2010. The report indicated that the management of both companies was ineffective and advocated for closure of underperforming branches across the world. This is because the operating cost and maintenance of total rewards plan was progressively increasing. However, the companies experienced massive decrease in sales in the year 2009. This created imbalance in the financial management whereby the companies were unable to generate enough revenue for various operations in the company. The progressive demands from the employees and production level increased the total expenditure of the two companies. This reduced the total revenues generated by the companies at the end of the accounting period. Therefore, a complete overhaul in the financial management and operations was paramount (GAO 2). This was aimed at sustaining the productivity of the companies for a long period. However, the increased demands of the companies necessitated the filing of bankruptcy protection in the year 2009. It is through the involvement of the government that aided in the provision of resources. The audit report advocated for the reduction in total expenditures in both companies. This is through reducing the number of human personnel and closure of the ineffective branches. Additionally, the report advocated for a government bailout to prevent the collapse of the two companies. Therefore, the companies responded by filing for bankruptcy. Additionally, the government of United States and Canada bought thirty percent of shares to aids in operations of the companies. Furthermore, the two companies received a total of two billion US dollars for the running cost.
To improve the productivity and the process of revenue generation both companies adopted the report suggestion of reducing the number of employees. The revision of labour contracts was conducted through the use of the collective bargains. This was paramount because the sixty percent of the total expenditures of the two companies was channelled to the implementation of total rewards. Therefore, the high numbers of workers were creating loopholes in the line of production and profitability. This is indicated whereby General Motors has more than two hundred and fifty workers across the world while Chrysler Company has over one hundred and ninety thousand workers. In the wake of the year 2008, General Motors experienced fifty percent drop in sales that led to loss of thirty one billion US dollars in revenues. Therefore, the government participation in the management of the two companies prevented the collapse process. This is because the government provided the much needed resources such as compensation resources to the workers (Treasury 2). The report also advocated for collective bargains among the proposed stakeholders of the two companies. This involved the government, the companies and the trade unions. The aim of the bargain was to distribute shares effectively on the basis of participation and resource allocation. Therefore, the government of United State was the majority share in the company through the provision of maximum resources. The government aided in restructuring the management process of the company by providing enough revenues for the implementation of total rewards. However, the two companies had conducted immediate crisis measures of reducing the number of employees in various branches in United States. In an effort to increase job opportunities and improve the economy, the government provided maximum resources to help in payment of salaries and running cost of the two companies.
The collective bargains between the trade unions and the two companies involved the reduction of compensation benefits and basic salaries. The implementation of the revised total rewards occurred during the period of recession. This was to propel the companies through generating maximum revenues that aid in reducing total expenditures. The report indicated that reducing the total rewards settlement among the workers in various branches of United States aided in product development process. This resulted to the increase in sales in the consecutive years (Haglund, 1). The closure of the dealership in the two companies was done on the basis of production level. The companies stipulated that the underperforming dealers were increasing the total expenditure while generating minimum revenues. Therefore, the companies adopted immediate counteractive measure to reduce the escalating expenses. Additionally, Chrysler stipulated that the process of reducing the number of the dealers and employees saved the company more than fifty thousand US dollars per branch closed. The viability of the process was questioned as the two companies’ experienced massive losses in the year 2008, which necessitated them to apply for bankrupt protection. Therefore, the government strategy was to reinstate the closed dealers and branches with an aim of increasing job opportunities. The opinion of the auditor stated that the two companies needed a holistic measure in the line of management. This is through implementing effective techniques of management such as recruitment of experienced and productive human personnel.
The two companies were to create strong networking base for the product consumers and dealers. This is through aggressive marketing and research on consumer behaviour with an aim increasing market competencies in local and international market. Improvement in customer services such as online enquires was proposed with an aim of increasing customer networks. The increased customer networks in the two companies thus increase in sales in the year 2010. Additionally, between the year 2011 and 2012, the two companies bought back majority of shares from the government. Furthermore, the two companies were able to settle some of their accrued debts in the year 2009 to the government (GAO, 3). Another opinion of the report revolved around selling of assets owned by the companies to other established companies in the automobile industry. This is exemplified ...