General Electric Company (NYSE:GE) Gets Reprive Alongwith KPMG
In a major development, the Securities and Exchange Commission(SEC) settled a case with KPMG LLP, which seems to come on a much softer stance than the regulator’s normal decisions. The regulator was extremely lenient to pronounce its judgement over the auditor-independence rules, having KPMG and General Electric Company (NYSE:GE) in context.
$8.2 Million Fine
The first part of the settlement, which came in two parts, obligated KPMG to pay a fine of $8.2 million towards fines and disgorgement. The SEC ruled that the KPMG provided bookkeeping and other barred services to three audit clients and that the KPMG partners owned stocks of one of its clients, which is completely out of law. The second part highlighted that KPMG followed practice of offering its own tax consultants to its audit clients, one of which is General Electric.
No Enforcement Action
The much prohibited acts by KPMG were first uncovered by Francine McKenna in March 2011. McKenna,who is an accounting and auditing author, even revealed that some of the KPMG’s employees at GE maintain their proper email-ids at the company. This was followed by the investigations by the SEC, which discovered a substantial violation of auditor independence rules by the firms. The commission then issued a report explaining the necessity to restrict from any arrangement of the sort of employee loaning as it gives opportunities to clients to violate federal security laws. However, surprisingly, the commission did not take any enforcement action against these actions of KPMG.
GE has been taking services of KPMG for over 100 years. In the recent past, GE has also assumed an important place in GE’s list as it paid nearly $100 million in the year 2012, for its GE capital arm. Altogether, GE has paid out more than $1.3 to KPMG so far. Reportedly, Mary Schapiro, SEC’s chairman had joined the GE’s board in 2013.