General Electric dealt the Big Four audit market a significant shakeup Monday as it announced the appointment of Deloitte as its new independent auditor for fiscal year 2021.
The announcement marks the end of a century-old relationship between GE and audit firm KPMG that dates all the way back to 1909. KPMG will continue in its capacity through the completion of its audit services for the fiscal year ending Dec. 31, 2020, and the filing of GE’s 2020 Annual Report.
“It has been an honor to serve as GE’s independent auditor for over 100 years and we will continue to serve GE with excellence and integrity as we complete the FY20 audit,” said a KPMG spokesperson. “We are proud of our audit services, powered by innovation and fueled by our values as we strive for quality in all that we do.”
The change comes as the end result of an audit tender process GE announced in December 2018. GE revealed in early 2018 that the Securities and Exchange Commission was investigating the company’s accounting practices after a $6.2 billion charge in late 2017 stemming from its GE Capital insurance portfolio. In October 2018, GE said the SEC expanded its investigation after the company took a $22 billion impairment charge to goodwill, most of which stems from the 2015 acquisition of the power and grid business of Alstom in France.
Further, GE in April 2019 agreed with the U.S. Department of Justice to pay a civil penalty of $1.5 billion related to its now-defunct WMC mortgage business. WMC was involved in originating and selling subprime mortgages in the lead up to the 2008-2009 financial crisis and subsequent recession.
According to an SEC filing in May, 701 million shareholders, or 10.8 percent of the total votes cast, called on the GE audit committee to replace KPMG as the company’s independent auditor for 2020. The number was down from as high as 35 percent of shareholder votes in 2018.
GE appointed Larry Culp as CEO in September 2018—the company’s first outside hire at the position in its 126-year history at the time. Culp also looked outside in the hiring of Carolina Dybeck Happe as chief financial officer in November 2019.