In its first Assessment of Internal Control over Financial Reporting (for the fiscal year ended December 31, 2004), General Electric identified a material weakness in internal control and concluded that its internal control over financial reporting was not effective as of that date. General Electric's auditor, KPMG, agreed with General Electric's assessment that internal control over financial reporting was not effective as of December 31,2004 and hence issued an adverse opinion over the effectiveness of internal control over financial reporting. Below is the sole material weakness as stated in both reports:

A failure to ensure the correct application of SFAS 133 when certain derivative transactions were entered into at [GE Capital Corporation] prior to August 2003 and failure to correct that error subsequently. Describe whether or not you concur that this one material weakness is sufficient to conclude that General Electric's internal control over financial reporting was not effective. In other words, describe whether you concur that the presence of one material weakness is sufficient to make such a strong conclusion. If you believe that this opinion is tod harsh, offer an alternative that you believe is more justifiable.