News
Jessica Fino 24 Apr 2018 02:18pm

KPMG could lose Wells Fargo and GE audits

Shareholders at two of KPMG’s biggest clients in the US could vote against its re-appointment in their upcoming annual general meeting

According to the Financial Times, shareholders at US bank Wells Fargo and conglomerate General Electric (GE) are being warned against retaining KPMG as their auditor after a series of financial scandals.

KPMG has served as Wells Fargo’s auditor since 1931, and GE’s since 1909 – making GE it’s longest-standing client, according to Audit Analytics.

Wells Fargo paid KPMG $54.9m (£39.37m) in fees last year, Auditor Analytics said, while GE paid $142.9m (£102.48m) for audit, audit-related and tax fees.

However, shareholder advisory groups Glass Lewis and the Institutional Shareholder Services (ISS) recommended that investors at the companies vote to replace KPMG “in light of several ongoing concerns”.

“While cognisant that an auditor is not expected to inspect every instance of potential fraud at a company, we believe that this unique case warrants additional scrutiny,” Glass Lewis told the FT, regarding Wells Fargo and KPMG.

ISS said shareholders might question whether a change of auditors would be warranted at this time, particularly in light of the accounting and reporting issues the company is facing.

Earlier this week, Wells Fargo agreed to pay a $1bn (£701m) fine as part of a deal to settle potential charges relating to misconduct at its home mortgage and auto loans business.

The bank was also fined $185m (£132.6m) and accused of “widespread illegal practice” by US regulators in 2016, after an independent review revealed that in order to meet targets, bank staff had opened 2.5 million fake consumer and small business retail banking deposit accounts and unsecured credit cards on behalf of existing customers.

Meanwhile, GE announced in January it was being investigated by the US Securities and Exchange Commission (SEC) over its accounting practices.

Wells Fargo’s annual meeting will take place today, while GE’s is scheduled for tomorrow.

KPMG has declined to comment.

Topics