Accounting Investigation Adds to Challenges Facing G.E.<br />that they are investigating the process leading to the insurance reserve increase<br />and the fourth-quarter charge as well as GE’s revenue recognition and controls for long-term service agreements.”<br />It’s not easy to slip an investigation of potential accounting issues past analysts,<br />and the stock price dropped another 2.7 percent that day after the disclosure.<br />On a conference call last week discussing the company’s $9.8 billion loss in its most recent quarter, Jamie<br />S. Miller, the chief financial officer, dropped a little tidbit that “we have been notified by the S. E.C.<br />He asks each candidate: “What is one plus one?” The winner answers: “What do you want it to be?”<br />General Electric disclosed on Jan. 24 that the Securities and Exchange Commission had begun an investigation of the company’s accounting practices.<br />With the company’s stock down more than 40 percent the last 12 months, the uncertainty of an accounting investigation will<br />only exacerbate the challenges facing John L. Flannery, the new chief executive, as he seeks to reorganize the company.<br />The S. E.C.’s efforts to aggressively stop accounting problems stems from the history of companies like Enron and WorldCom, where small steps to burnish the financial statements burgeoned into frauds<br />that took down the companies, ended in thousands of job losses and cost shareholders billions.
