October 26, 2020

Auditor Swap: General Electric and KPMG Officially Call It Quits

A love affair that spanned more than 110 years is coming to an end.

General Electric announced today that it and KPMG are going their separate ways after this year. And GE’s new external auditing paramour is Deloitte.

Here’s the statement GE released on Monday morning:

GE (NYSE:GE) announced today that, following a thorough and competitive review process, its Audit Committee selected Deloitte as the company’s independent auditor for the 2021 fiscal year.

KPMG will continue in its capacity through the completion of its audit services for the fiscal year ending December 31, 2020, and the filing of GE’s 2020 Annual Report on Form 10-K. The selection of Deloitte concludes the audit tender process that GE announced in December of 2018.

Short and to the point. No “we still have love for each other” or “we will always cherish our time together” or “we still have the utmost respect for one another” or “please respect our privacy during this difficult time.”

But the writing has been on the wall for a while now that GE was looking for a new suitor, as we reported in December 2018:

But the spark in the GE-KPMG relationship might be starting to fizzle out. About 35% of GE shareholders voted in April against KPMG as GE’s external auditor, after two proxy advisory firms urged GE shareholders to cast a “no” vote for the Big 4 firm. Then last week, GE announced that its audit committee had moved forward with a tender process for the appointment of an independent auditor.

The audit committee did reappoint KPMG as GE’s auditor for 2019, but the plan to solicit bids from other audit firms casts some doubt that the relationship will continue past next year.

GE and KPMG decided to gut it out for one more year, through 2020, but according to Barron’s, GE made the decision to change independent auditors on June 19.

Just for the helluva it, I looked at GE’s proxy statements for the past five years to see how much in fees the company has paid to KPMG:

2019

  • Audit fees: $61.1 million
  • Audit-related fees: $13.9 million
  • Tax fees: $4.1 million
  • Other fees: $0
  • Total: $79.1 million

2018

  • Audit fees: $63.7 million
  • Audit-related fees: $40.2 million
  • Tax fees: $700,000
  • Other fees: $0
  • Total: $104.6 million

2017

  • Audit fees: $95.8 million
  • Audit-related fees: $45.4 million
  • Tax fees: $1.7 million
  • Other fees: $0
  • Total: $142.9 million

2016

  • Audit fees: $81.5 million
  • Audit-related fees: $6.9 million
  • Tax fees: $1.5 million
  • Other fees: $0
  • Total: $89.9 million

2015

  • Audit fees: $75 million
  • Audit-related fees: $20.8 million
  • Tax fees: $1.8 million
  • Other fees: $0
  • Total: $97.6 million

That’s an awful lot of money walking out KPMG’s door.

KPMG wrote the following statement in the 8-K GE filed with the SEC regarding the switch in auditors:

June 22, 2020

Securities and Exchange Commission
Washington, D.C. 20549

Ladies and Gentlemen:

We are currently principal accountants for General Electric Company (the “Company”) and, under the date of February 24, 2020, we reported on the consolidated financial statements of the Company as of and for the years ended December 31, 2019 and 2018, and the effectiveness of internal control over financial reporting as of December 31, 2019. On June 19, 2020, we were notified that the Company selected Deloitte & Touche LLP as its principal accountant for its fiscal year ending December 31, 2021, and the auditor-client relationship with KPMG LLP will cease upon completion of the audit of the Company’s consolidated financial statements as of and for the year ended December 31, 2020 and the effectiveness of internal control over financial reporting as of December 31, 2020, and the issuance of our reports thereon. We have read the Company’s statements included under Item 4.01 of its Form 8-K dated June 22, 2020, and we agree with such statements, except that we are not in a position to agree or disagree with any of the Company’s statements in the last paragraph regarding the Company not consulting with Deloitte & Touche LLP.

Very truly yours,
/s/ KPMG LLP

So long, KPMGE. Good luck to GEloitte.

Related article:

Longtime KPMG Client General Electric Looking to Mess Around with Another Audit Firm

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