Our approach - KPMG | BY
Share with your friends

Our approach

Our approach

Effective and efficient audits are dependent upon applying clear and consistent standards and robust innovative tools, providing access to the right knowledge and skills, encouraging a culture of consultation. We understand that how an audit is conducted and communicated is as important as the final results.


Related content

Our approach infographic

Consistent methodology

Consistent application of audit standards across the KPMG network is driven through groups of global professionals.

Our audit methodology and audit tools, developed and maintained by the GSC, are:

  • globally consistent and fully compliant with ISAs
  • designed to be effective in all types of risk environments and economic circumstances
  • made available to all KPMG audit professionals and required to be used where necessary for compliance
  • applied even where local auditing standards are less demanding than the ISAs.

The methodology is set out in KPMG International’s Audit Manual (KAM) and includes additional requirements that go beyond the ISAs, which KPMG believes enhance the quality of the audit. KPMG member firms may add local requirements and/or guidance in KAM to comply with additional professional, legal or regulatory requirements.

KAM contains examples and guidance for, among other things, procedures intended to identify and assess the risk of material misstatement and procedures to respond to those assessed risks.

The KPMG audit methodology encourages use of specialists when appropriate, and also requires involvement of relevant specialists in the core audit engagement team when certain criteria are met or where the audit team considers it appropriate or necessary.

KAM includes the implementation of quality control procedures at the engagement level that provide reasonable assurance that engagements comply with the relevant professional, legal, regulatory and KPMG requirements.

The policies and procedures set out in KAM are specific to audits and supplement the policies and procedures set out in the GQ&RM Manual that is applicable to all KPMG member firms, functions and personnel.

The ISG interprets international audit and accounting standards and facilitates consistent application by issuing practical guidance. ISG communicates developments and consequent changes in guidance or requirements to each member firm DPP that support member firm engagement teams. The Global Topic Teams act as central contact points for technical assistance to support consistent application and reporting practices.

Developments from the IAASB and/or the IASB are tracked through the ISA and global IFRS panels of seasoned industry and technical professionals who contribute, when appropriate, to consultations from standard setters. Refer to Our culture for more details on ISG.

The KPMG Audit process

The KPMG audit workflow is enabled through eAudIT, an activity-based workflow and electronic audit file. eAudIT integrates KPMG’s audit methodology, guidance and industry knowledge, and the tools needed to manage audits consistently from beginning to end.

Our high-quality audit process includes the following:

  • timely partner and manager involvement throughout the engagement
  • access to the right knowledge including involvement of specialists, training and experience requirements and relevant industry expertise
  • critical assessment of all audit evidence obtained during the audit, exercising appropriate professional judgment
  • ongoing mentoring, supervision and review of the engagement team
  • managing and documenting the audit.

Timely partner and manager involvement

To help identify and respond to the significant audit risks applicable to each audit, the engagement team requires an understanding of the client’s business, its financial position and the environment in which it operates. The engagement partner is responsible for the overall quality of the audit engagement and, therefore, for the direction, supervision and performance of the engagement.

Involvement and leadership from the engagement partner during the planning process helps set the appropriate scope and tone for the audit, and helps the engagement team obtain maximum benefit from the partner’s experience and skill. Timely involvement of the engagement partner at other stages of the engagement allows the engagement partner to identify and appropriately address matters significant to the engagement, including critical areas of judgment and significant risks.

The engagement partner is responsible for the final audit opinion, and reviews key audit documentation — in particular, documentation relating to significant matters arising during the audit and conclusions reached. The engagement manager assists the partner in meeting these responsibilities and in the day-to-day liaison with the client and team, building a deep business understanding that helps the partner and team deliver valued insights.

Access to the right knowledge

Training and experience requirements for IFRS and US GAAP engagements

Specific requirements apply for partners, managers and EQC reviewers working on IFRS engagements in countries where IFRS is not the predominant financial reporting framework. Similar policies apply for engagements performed outside of the US to report on financial statements or financial information prepared in accordance with US GAAP and/or audited in accordance with US auditing standards, including reporting on the effectiveness of the entity’s internal control over financial reporting (ICOFR). These require that the partner, manager and EQC reviewer have completed relevant training and that the engagement team, collectively, has sufficient experience to perform the engagement or has implemented appropriate safeguards to address any shortfalls.

Access to specialist networks

Engagement teams have access to a network of KPMG specialists — either within their member firm or in other KPMG member firms. Engagement partners are responsible for ensuring that their engagement teams have the appropriate competences and capabilities, including time and the use of relevant specialists.

The need for specialists in areas such as information technology, tax, treasury, actuarial, forensic and valuations to be assigned to a specific audit engagement is considered as part of the audit engagement acceptance and continuance process (refer to Our people).

Specialists who are members of an audit team have the competencies, capabilities and objectivity to appropriately fulfill their role. Training on audit concepts is provided to the relevant specialists.

Developing business understanding and industry knowledge

A key part of quality is having a detailed understanding of the client’s business and industry.

For significant industries, global audit sector leads are appointed to support the development of relevant industry information, which is made available to audit professionals through eAudIT. This knowledge comprises examples of industry audit procedures and other information (such as typical risks and accounting processes). In addition, industry overviews are available, which provide general and business information in respect of particular industries, as well as a summary of the industry knowledge provided in eAudIT.

Exercise of professional judgment and professional skepticism

We recognize that critical assessment of all audit evidence and the exercise of professional skepticism is critically important to our role as auditor in delivering a quality audit. Professional skepticism involves a questioning mind, an appetite to challenge and alertness to inconsistencies. It features prominently throughout auditing standards and attracts significant focus from regulators.

We have developed a professional judgment process that facilitates good judgment by introducing a structured approach to auditing areas that require significant judgment. It also reinforces the importance of independence and objectivity and emphasizes the importance of having the right mindset — to apply professional skepticism.

The use of the professional judgment process and the application of professional skepticism is reinforced through coaching and training, acknowledging that judgment is a skill developed over time and with different experiences.

Guidance is available on judgmental audit topics — used by audit teams and embedded within audit learning solutions.

Focus on effectiveness of group audits

KPMG International audit methodology covers the conduct of group audits in detail. It stresses the importance of effective two-way communication between the group engagement team and the component auditors. The group audit engagement partner is required to evaluate the competence of component auditors, irrespective of whether they are KPMG member firms, as part of the engagement acceptance process.

Consistent methodology and tools are used across the KPMG network. Lead audit engagement partners are provided with information on component auditors within the KPMG network to help evaluate their competence and capabilities. In addition, for PCAOB engagements, the results of relevant inspections related to the KPMG component member firms are made available to the lead audit engagement partner. Lead audit engagement partners may review component auditor engagement documentation in person or obtain electronic access.

Ongoing mentoring, supervision and review

We understand that skills build over time and through exposure to different experiences. To invest in the building of skills and capabilities of KPMG professionals, without compromising on quality, member firms promote a continuous learning environment and support a coaching culture.

Ongoing mentoring, coaching and supervision during an audit involves:

  • engagement partner participation in planning discussions
  • tracking the progress of the audit engagement
  • considering the competence and capabilities of the individual members of the engagement team, including whether they have sufficient time to carry out their work, whether they understand their instructions, and whether the work is being carried out in accordance with the planned approach to the engagement
  • helping engagement team members address any significant matters that arise during the audit and modifying the planned approach appropriately
  • identifying matters for consultation with more experienced team members during the engagement.

A key part of effective mentoring and supervision is timely review of the work performed so that significant matters are promptly identified, discussed and addressed. Refer below to Access to the right knowledge for details on the role of the EQC reviewer in challenge and review.

Appropriately supported and documented conclusions

Member firms use KAM and KPMG International’s electronic audit tool, eAudIT, to provide guidance, mechanisms for and documentation of the supervision and control of the audit engagement. Audit documentation records the audit procedures performed, evidence obtained, and conclusions reached on each audit engagement. KPMG International’s policies require review of documentation by more experienced engagement team members.

KAM recognizes that documentation prepared on a timely basis helps to enhance the quality of the audit and facilitates the effective review and evaluation of the audit evidence obtained and conclusions reached before the report is finalized.

Teams are required to assemble a complete and final set of audit documentation for retention within an appropriate time period. This is ordinarily not more than 60 calendar days from the date of the auditors’ report, but may be more restrictive under certain applicable regulations.

The key principle that engagement team members are required to consider when preparing audit documentation is whether an experienced auditor, having no previous connection with the engagement, will understand:

  • the nature, timing and extent of audit procedures performed to comply with the ISAs, KAM and other requirements
  • applicable legal and regulatory requirements
  • the results of the procedures performed, and the audit evidence obtained
  • significant findings and issues arising during the audit, and actions taken to address them (including additional audit evidence obtained)
  • the basis for the conclusions reached, and significant professional judgments made in reaching those conclusions.

Robust challenge and review

Timely engagement quality control review

EQC reviewers are independent of the engagement team and have the appropriate experience and knowledge to perform an objective review of the more critical decisions and judgments made by the engagement team and the appropriateness of the financial statements. KPMG International is continually seeking to strengthen and improve the role that the EQC review plays in member firm audits and in recent years has taken a number of actions to reinforce this, including issuing leading practices guidance, incorporating specific review requirements into eAudIT and developing policies relating to recognition, nomination and development of EQC reviewers.

An EQC reviewer is required to be appointed for audits, including any related review(s) of interim financial information, of all listed entities, non-listed entities with a high public profile, engagements that require an EQC review under applicable laws or regulations, and other engagements as designated by the Risk Management Partner or country Head of Audit.

The audit is completed only when the EQC reviewer is satisfied that all significant questions raised have been resolved, though the engagement partner is ultimately responsible for the resolution of accounting and auditing matters.

Innovative tools and technology

Each KPMG auditor around the world has access to the full suite of KPMG’s industry expertise and audit methodology through the electronic audit workflow tool, eAudIT. This leads KPMG engagement teams smoothly and consistently through the audit process. This tool continues to evolve to keep pace with the changing demands of the audit environment.

Technology and innovation are changing the way member firms execute their audit engagements, empowering their people to deliver greater quality and value. Making data and analytics (D&A) a core part of the KPMG audit is critical to our mission of driving audit quality. KPMG Clara, our smart audit platform, was launched in mid-2017. It puts technology and D&A right at the heart of our approach, bringing advanced capabilities and knowledge together in one environment.

KPMG Clara is built to integrate all of our advanced capabilities and knowledge, and empower our people to work in smarter ways, unlocking the power of innovation to help deliver a robust and leading-edge audit. It is our gateway to continued audit innovation, and incremental additions will be made over time.

Further details on innovation in audit tools and technology are set out in the KPMG International Annual Review.

Effective communication

Appropriate auditors’ reports

Auditing standards, applicable legislation and regulation largely dictate the format and content of the auditors’ report that includes an opinion on the fair presentation of the client’s financial statements in all material respects. Experienced engagement partners form all audit opinions based on the audit performed.

In preparing audit reports, engagement partners have access to extensive reporting guidance and technical support through consultations with DPPs, especially where there are significant matters to be reported to users of the audit report (e.g. as a modification to the opinion or through the inclusion of an emphasis of matter or other matter paragraph).

Communications with those charged with governance

Honest and candid communication with clients, including management and audit committees, is a key aspect of our reporting and quality service delivery. We stress the importance of keeping the client informed of issues arising throughout the audit and the need to listen and understand their views. Member firms and KPMG professionals achieve this through a combination of reports and presentations, attendance at audit committee or board meetings and, when appropriate, ongoing informal discussions with management and members of the audit committee.

The role of audit committees is key in supporting better quality auditing by managing the relationship between company and auditor and challenging what auditors do and how they do it.

Audit Committee Institute

In recognition of the demanding and important role that audit committees play for the capital markets and also of the challenges that they face in meeting their responsibilities, KPMG’s Audit Committee Institute (ACI) aims to help audit committee members enhance their commitment and ability to implement effective audit committee processes. KPMG member firms provide audit committee and board members with practical insights, resources and peer-exchange opportunities focused on strengthening oversight of financial reporting and audit quality. The ACI’s offerings cover the array of challenges facing boards and businesses today — from risk management and emerging technologies to strategy and global compliance.

The ACI operates in over 40 countries across the globe and provides audit committee members with authoritative guidance on matters of interest to audit committees as well as the opportunity to network with their peers during an extensive program of technical updates and awareness seminars.


Connect with us


Want to do business with KPMG?


Request for proposal