General Electric Co. has been dealing with some accounting issues that could’ve used some tax audit insurance recently, and, as a result, it’s looking like the company’s about to cut ties with a long-time partner.
The company’s moving ahead with plans to solicit bids for a new independent auditor, which might mean that it will ending a relationship with KPMG LLP, which has been its auditor for more than a century. KPMG LLP will remain as the company’s auditor for 2019, but this leaves questions as to the future.
According to a statement made by GE on December 14, the selection process for the auditing firm will be based on their progress on their reorganisation efforts.
Notably, this announcement comes in spite of the fact that about 65% of GE’s shareholders voting in favour of keeping KPMG as company auditor for 2018. According to the company, the audit committee have been asking for feedback from shareholders and are looking at other options.
GE Audit Committee Chairman Geoff Beattie stated that launching the process to find an auditor is their response to shareholders and balances the considerations about going through a change in auditing firms amidst the current business actions that the company is currently executing.
KPMG and its predecessor have been auditing GE’s books ever since 1909, one of the longest auditor-client relationships in the world. The auditing firm has hundreds of employees working on the GE account, which, in 2017, managed to generate fees totalling to $142.9 million.
KPMG released a statement on the same day via a spokesperson that they’re privileged to have worked for GE for so long. They say that it’s only smart and responsible for the company to review and assess their tax audit insurance, their auditor relationships and other financial processes, and they welcome the future opportunity to work with GE to demonstrate what the accounting firm can deliver.
Back in April 2018, two major proxy-advisory firms recommended that GE fire KPMG as its auditor with the revelation of the accounting issues that’s plaguing the industrial giant.
The US Justice Department and the Securities and Exchange Commission are currently looking into a $22 billion charge GE recorded in its third quarter regarding acquisitions in its power unit and $6 billion charge recorded earlier in 2018 with relations to its insurance operations.