KPMG International Cooperative
KPMG is a Dutch financial professional services company, and one of the "Big Four auditors", along with Deloitte, Ernst & Young (EY), and PricewaterhouseCoopers (PwC). The name "KPMG" stands for "Klynveld Peat Marwick Goerdeler." It was chosen when KMG (Klynveld Main Goerdeler) merged with Peat Marwick in 1987.
Based in the Netherlands, KPMG employs 189,000 people and has 3 lines of services: financial audit, tax, and advisory. Its tax and advisory services are further divided into various service groups.
KPMG International Cooperative is a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services.
- Nov.09.2018: Pressure on rivals as KPMG limits work for audit clients. KPMG will stop providing consulting and tax advice to all of the large listed companies it audits after accusations that the practice has compromised its independence. The firm will lose up to £80 million in fees, or 40 per cent of its audit turnover. It is fighting to save its reputation, which was damaged by the collapse of Carillion, the outsourcing company, and by scandals in South Africa and America. This puts pressure on KPMG’s Big Four rivals, PWC,Deloitte and EY, and the smaller firms Grant Thornton and BDO to follow suit. The Big Four made about £3 bn in fees from audit clients last year, with £1 bn of that generated by non-audit services. Last month the Financial Reporting Council, the auditing regulator, said it was reviewing whether to ban firms from providing consulting services to the companies they audit. The competition watchdog is examining Britain’s audit industry over concerns that it is not working well for the economy or investors, and will report its initial findings in December. Sir John Kingman, chairman of Legal & General, is reviewing the role and effectiveness of the audit watchdog and will deliver proposals for reforming the regulator before the end of the year. Tabby Kinder, The Times.
- Aug.21.2018: KPMG fined £2.1m for misconduct over work for Ted Baker. KPMG has been fined £2.1m for misconduct in its work for Ted Baker after its auditors signed off numbers in the retailer’s accounts that had been calculated by consultants who also worked for the Big Four accountancy firm. The Financial Reporting Council, which regulates auditors in Britain, said that the firm’s dual role had “posed an unacceptable self-review threat” and had “led to the loss of KPMG’s independence in respect of the audits”. Michael Barradell, the KPMG partner responsible for the Ted Baker audit, was fined £46,900. KPMG was paid almost £1m for its consulting work, in which a team led by Kathryn Britten, a forensic accounting expert, advised Ted Baker on how much a legal claim brought against Axa Insurance, the group’s insurer, could be worth. The size of the challenge was a material sum in Ted Baker’s financial results, which were audited by KPMG. Ted Baker paid KPMG £952,000 for the litigation advice and £434,000 for the audit. KPMG carried out the work in 2013 and 2015. The FRC said that KPMG’s work was in breach of ethical standards and undermined confidence in the objectivity of an audit. KPMG is also under pressure internationally. In South Africa it has lost clients and cut hundreds of staff because of its links with a govt corruption scandal. In the US, the Securities and Exchange Commission charged 3 former KPMG partners in Jan.2018 with leaking confidential information. Ms Britten has since left KPMG and works for Alix Partners, a restructuring firm. In Apr.2018, Sir John Kingman, chairman of Legal & General, was selected to lead a govt review of whether the FRC was fit for purpose after scandals in the audit market. MPs had criticised the regulator and accused it of being too close to the Big Four auditors, which also include PWC, Deloitte and EY. Tabby Kinder, The Times.
- Jun.12.2018: KPMG fined £3.2m for Quindell audit failings. The Financial Reporting Council has fined KPMG £3.2m for its auditing of Quindell, ending a 3-year investigation into the bookkeeping of the scandal-hit insurance technology company now known as Watchstone. The FRC also reprimanded William Smith, one of KPMG’s partners, and fined him £80,000. KPMG audits 26 businesses in the FTSE 100, including British American Tobacco, Barclays and BT. It has been criticised by the govts of theUS, South Africa and Britain this year. The FRC has been heavily criticised by MPs, who have called it “toothless” and its investigations “inept and slow”. The regulator is also the subject of a govt review led by Sir John Kingman, which could significantly change how it operates. The FRC has powers to fine auditors up to £10m for poor audit work and can exclude accountants from the profession for ten years for dishonesty. The fine is KPMG is among the FRC’s largest such penalties. Last year it ordered PWC to pay a £5.1m fine for misconduct in its audits of RSM Tenon. KPMG is also facing an investigation by the regulator into its work for Carillion in the years before the outsourcing company’s collapse. This month the accountancy firm announced plans to cut 400 jobs in South Africa in a restructuring of the business. Tabby Kinder, The Times.
- May.29.2018: The financial scandal no one is talking about. by shaping the world in which they operate, the accountants have ensured that they are unlikely to face their own downfall. As the world stumbles from one crisis to the next, its economy precarious and its core financial markets inadequately reformed, it won’t be the accountants who pay the price of their failure to hold capitalism to account. It will once again be the millions who lose their jobs and their livelihoods. After the fall of Lehman Brothers brought economies to their knees in 2008, it was apparent that Ernst & Young’s audits of that bank had been all but worthless. Similar failures on the other side of the Atlantic proved that balance sheets everywhere were full of dross signed off as gold. The chairman of HBOS, arguably Britain’s most dubious lender of the boom years, explained to a subsequent parliamentary enquiry: “I met alone with the auditors – the two main partners – at least once a year, and, in our meeting, they could air anything that they found difficult. Although we had interesting discussions – they were very helpful about the business – there were never any issues raised.” Just 4 major global firms – Deloitte, PricewaterhouseCoopers (PwC), Ernst & Young (EY) and KPMG – audit 97% of US public companies and all the UK’s top 100 corporations, verifying that their accounts present a trustworthy and fair view of their business to investors, customers and workers. They are the only players large enough to check the numbers for these multinational organisations, and thus enjoy effective cartel status. Despite the economic risks posed by misleading accounting, the bean counters perform their duties with relative impunity. The big firms have persuaded govts that litigation against them is an existential threat to the economy. ... Where once they were outsiders scrutinising the commercial world, the big four are now insiders burrowing ever deeper into it. The threat of an already too-close relationship with business becoming even more intimate is ignored. more Richard Brooks, The Guardian.
- Mar.11.2018: Ethnic minorities paid less at KPMG. KPMG pays its white staff and equity partners 34% more on average than colleagues from ethnic minorities, the accountancy giant has revealed. Rival EY last week reported an ethnicity pay gap of 38.1% including partners. Deloitte revealed a 12.9% gap in Dec.2017, but this only included salaried partners, not equity partners. Rosamund Urwin, The Times.
- Feb.23.2018: Auditors role needs reform, says KPMG's Michelle Hinchliffe. She conceded that reform could address that. "Perhaps an audit needs to do more. Perhaps auditors need to provide more ongoing assessments of the risks to businesses and not just a 12-month snapshot [in the annual audit report]." Robert Lea, The Times.
- Feb.13.2018: Carillion: accountants accused of 'feasting' on company. MPs have accused the "big four" accountancy firms of "feasting on what was soon to become a carcass" as it emerged they banked £72m for work linked to collapsed govt contractor Carillion in the years leading up to its financial failure. KPMG, Deloitte, EY, PricewaterhouseCoopers (PwC). Frank Field, chair of the work and pensions committee, highlighted the benefits enjoyed by the accounting profession from work performed for Carillion. He said the fact that PwC was the only major firm that did not have a conflict of interest preventing it from administering Carillion’s liquidation showed the industry was an “oligopoly”. Three of Carillion’s former finance directors had also worked for big four accountancy firms, two of them at KPMG. KPMG chairman and senior partner Bill Michael. Rob Davies, The Guardian.
- Jan.29.2018: KPMG to be investigated over Carillion auditing. Watchdog opens inquiry into accountancy firm’s role in collapse of construction giant. The accountancy firm KPMG is to be investigated by the UK’s Financial Reporting Council (FRC) over its role in the collapse of constrution firm Carillion. News of the FRC investigation came as Frank Field, the chair of the Commons work and pensions committee, accused Carillion of trying to “wriggle out of its obligations to its pensioners for the last 10 years”. Instead of tackling its growing pension deficit, he said, the company paid out hundreds of millions of pounds in dividends to shareholders and “handsome” pay packets to bosses. Field added that the Pensions Regulator’s investigation was “much too late for the pensioners, who will inevitably now receive reduced benefits through the Pension Protection Fund, and too late for the PPF levy payers, who will pick up the tab. The Pensions Regulator has been aware of problems in Carillion since at least 2008, but there is little evidence of any hard action.” Robert Branagh, president of the Pensions Management Institute. Robin Ellison, chair of trustees of Carillion’s defined benefit pension scheme. Julia Kollewe, The Guardian.
- Jan.07.2018: Theresa May urged to drop auditors KPMG from Grenfell inquiry. MPs say the firm has a conflict of interest because of auditing work for companies involved in putting cladding on tower. Seventy-one academics, writers and campaigning organisations, as well as two Labour MPs, Clive Lewis and Emma Dent-Coad, have sent an open letter to the prime minister calling on her to cancel the appointment of auditors KPMG to assist with the Grenfell Tower inquiry. They said that KPMG audits Celotex, the parent company that produced the insulation on the building, alongside its role as auditor of the Royal Borough of Kensington and Chelsea (RBKC), and Rydon Group, the contractor that refurbished Grenfell Tower. Diane Towler, The Guardian. Update: KPMG announced they are stepping down.
- Watchdog set to publish audit grades. This year PwC, Deloitte, KPMG, EY, Grant Thornton, BDO and Mazars failed to meet the Financial Reporting Council’s quality target for FTSE 350 companies. The FRC requires that 90% of inspected audits should be classified as good or requiring no more than limited improvements. Louisa Clarence-Smith, The Times, Nov.06.2019.
- Corporate Political Engagement Index 2018. The new index of 104 multi-national companies, many of whom regularly meet with govt, has found nearly 75% are failing to adequately disclose how they engage with politicians. Only one company received the highest grade, with the average grade being "E" – representing poor standards in transparency. Transparency International UK, Nov.2018.