GE Case

Topics: Audit, Auditing, Internal control Pages: 2 (472 words) Published: March 16, 2015


GE: How Much Are Auditors Paid?

1. Requirements of Sarbanes-Oxley related to nonaudit services such as the design and implementation of financial information system and internal audit affect perceptions of the auditors’ independence for two reasons. The first is because of the potential conflict between these services and the audit work which affect the independent of the auditor. Second, because these services increase the revenue of the accounting firm from one client, which can make the client a major revenue source for the accounting firm, and hence makes the accounting firm depend on the existence of the client. This problem happened with Arthur Anderson when it provided extensive services to Enron prior to its failure. 2. Based on the fees paid to our company in 2000, our incentive in insisting upon the adjustment would be based on our responsibility on the design and implementing of the Financial Information System. While our incentive will differ in 2004 based on our responsibility on the internal requirements rules of section 404. 3. In general, I think that Sarbanes-Oxley has increased the expenses of these services. The total fees paid by GE to the external auditor (KPMG) is in the same range between the years of 2000-2012 (except for an increase in 2008). However, the auditor (KPMG) is not responsible for the Financial Information System work anymore after 2000, which means that another company is doing the FIS design and implementation in the years after 2000 and is being paid separately. Therefore, the expenses of these services has increased about 50 million dollars. We can also see that the increase is mainly in the audit fees. 4. In general, the same trend can be noticed with fees paid to auditors by the Fortune 100 companies. More amounts are paid toward the audit fees and no more Financial Information System fees are paid to the auditors who are prohibited from providing the service after Sarbanes-Oxley act, which...
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