Industrial titan GE has been having a bad year, as, among other things, their investigation insurance wasn’t enough to hold off an SEC inquiry. Now, the company is under pressure to get rid of its long time auditor, KPMG, the firm that’s been responsible for auditing their numbers since the President of the US was William Howard Taft in the early 1900’s.
A few shareholder watchdog group have brought up concerns that GE and KPMG have become lax with things like investigation insurance and auditing during their 109 years working together. Both the Institutional Shareholder Services and Glass-Lewis are asking that GE’s shareholders not ratify KPMG’s position as company auditor at the annual shareholder meeting.
They say that the long standing arrangement has thrown KPMG’s effectiveness as an auditing firm and relation with GE in doubt, and adding that a long-standing relationship with an auditor can lead to them being too close to each other, while bringing in a new auditor can uncover issues that would’ve otherwise needed investigation insurance thanks to being overlooked by the long-time auditor.
The question of whether or not to stick with KPMG is one of many issues GE and its shareholders are dealing with following a bad 2018. Thanks to several bad deal, the company is set to hit a cash crisis, which has resulted in its stock price and coveted dividend dropping by half. There’s also talks that the company is likely to be removed from the Dow Jones Industrial Average.
The company’s earnings report in late April, however, offered some hope to the company, as the numbers suggested that the turnaround plan set by company CEO John Flannery is starting to work. However, the industry giant, is still having its accounting procedures under question.
The SEC investigation isn’t the first time GE has been under scrutiny; back in 2009, the SEC charged GE with accounting fraud, saying that GE used extremely aggressive accounting to provide misleading information to investors. The company forked over $50 million to settle the case, but did not deny or admit the veracity of the claims.
GE is currently getting suggestions, with groups like the ISS saying that the company’s under performance and issues with its business model and corporate culture, made abundantly clear with the issues of 2018, showed that the company could use more oversight.