GE Opens Door to Replace KPMG as Auditor After Financial Miscues

(Bloomberg) -- General Electric Co. opened the door to replacing KPMG as its auditor, potentially ending a relationship that goes back more than a century, after high-profile financial stumbles spurred the manufacturer’s share collapse.

  • The board will hold a competition for the auditor position, GE said in a statement Friday. The appointment date will be based on progress in the company’s plan to revamp its portfolio, and GE will stick with KPMG as auditor in 2019.

Key Insights

  • GE’s ties with KPMG have drawn scrutiny amid questions over whether a too-cozy relationship allowed problems at the manufacturer to metastasize without proper oversight.
  • GE said the board’s audit committee had been considering options after KPMG was ratified with just 65 percent of the vote at April’s annual meeting. Proxy-advisory firms Glass Lewis & Co. and Institutional Shareholder Services recommended against bringing KPMG back.
  • GE announced a $6.2 billion charge at a long-term care insurance portfolio in January, plus a $15 billion shortfall in insurance reserves. The company revealed another charge of $22 billion related to the power business in October. The U.S. Justice Department and Securities and Exchange Commission are investigating GE’s accounting.

Market Reaction

  • GE fell 1 percent to $7.13 ahead of regular trading in New York. GE’s market value has tumbled more than $200 billion during the last two years.

Get More

  • For details on GE’s announcement, click here
  • For a look at GE’s financial stumbles, click here

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