As auditors we recognize our work is pivotal to addressing the key global challenge of our time: restoring public trust in institutions.
As independent auditors our integrity is our currency. So when we talk about how we are striving to maintain and improve quality, as we do throughout this report, it is not some abstract aspiration. It is fundamental to our purpose.
I am delighted to have taken on the responsibility of establishing a Global Audit Quality Committee (GACQ) which I chair, which has taken responsibility for monitoring and driving improvements to audit quality across our international firm. The Global Audit Quality Committee (GAQC) comprises country senior partners (CEOs) from our largest firms — a demonstration of our united view that audit quality is paramount to our firm, and to the effective functioning of capital markets. Senior partners of Global Board member firms are now held accountable to the Global Chairman and the GAQC for achieving the audit quality expectations of our stakeholders.
As a means of further improving audit quality, investment is being driven into better digital platforms and AI initiatives. A most exciting aspect of this powerful new tech is how it frees our people to unleash the best of their human abilities. Being a good auditor means having an inquiring mind and the emotional intelligence to understand different people so they engage constructively with you. The challenge of aligning our best human qualities with sophisticated digital tools is one we should relish.
Auditors must be relentless in the pursuit of the highest standards if we are to earn and build the trust we seek and I am delighted to be charged with overseeing KPMG's plan to deliver this to our capital markets globally.
Chairman of the Global
Audit Quality Committee of the Board
"The leadership of senior partners and the accountability of audit leaders is fundamental to driving audit quality. We are reinforcing this through investments in our system of quality management, global monitoring of audit quality and enhanced support and tools for engagement teams." — Rod Devlin, Global Head of Audit Quality, KPMG International
We have introduced a number of changes as we continue to invest in continuous improvement. These include the creation of the GAQC of the Global Board, comprising senior partners from the largest firms, and the appointment of a dedicated Global Head of Audit Quality who reports to the committee.
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We are seeing a new level of interest from stakeholders in audit quality, and we welcome that interest. KPMG has always been, at heart, an audit organization, and continuously improving audit quality is central to who we are.
It's important to be clear on how audit quality is defined, because a common understanding and definition helps to bring consistency to our audit engagements across our global network. At KPMG, audit quality is about consistent execution throughout the network in line with the requirements and intent of professional standards, and within a strong system of quality controls. All of our related activities are undertaken in an environment of objectivity, independence, ethics and integrity. That's what we stand for, that's how we measure our people and measure our practices.
Everyone is accountable for audit quality: from audit teams on the ground, to individual engagement partners, and through to the most senior ranks of KPMG member firms.
Good practice management at a member firm level also plays a significant part — in terms of real-time support for engagement teams, and strong support functions to help them carry out their tasks.
We are investing more in growing our audit quality monitoring group that monitors both live and completed engagements — independent of the firms, inspecting engagements and looking at the strength of their system of quality control. This includes a robust root cause and remediation program, looking at underlying causes of issues identified, and the actions taken by member firms.
The more we standardize the way we conduct our audits, and the more global consistency we build into our processes and technology, the more effective we'll be at meeting the high standards we've set for audit quality. It provides the framework for success.
A robust and consistent system of quality control is essential to performing high-quality services. Accordingly, KPMG International has quality control policies that apply to all member firms. These are included in KPMG's Global Quality & Risk Management Manual (GQ&RM Manual) available to all KPMG partners and staff. These policies and associated procedures are designed to assist member firms in complying with relevant professional standards, regulatory and legal requirements, and in issuing reports that are appropriate to the circumstances.
These policies and procedures are based on the ISQC 1 and on the Code of Ethics for Professional Accountants issued by the International Ethics Standards Board for Accountants (IESBA). Both of these are relevant to member firms that perform statutory audits and other assurance and related services engagements.
Member firms are required to implement KPMG International policies and procedures and adopt their own additional policies and procedures that are designed to address rules and standards applicable to their own jurisdictions as well as applicable legal and regulatory requirements.
KPMG encourages a strong culture of consultation that supports member firm engagement teams throughout their decision-making processes and is a fundamental contributor to audit quality. KPMG promotes a culture in which consultation is recognized as a strength, and that encourages partners and staff to consult on difficult or contentious matters.
To help with this, member firms are required to have established protocols for consultation and documentation of significant accounting and auditing matters, including procedures to facilitate resolution of differences of opinion on engagement issues. In addition, the GQ&RM Manual includes mandatory consultation requirements on certain matters such as client integrity.
Technical consultation and global resources
We are committed to technical excellence. Technical auditing and accounting support is available to member firms through the Global Service Centre (GSC) and the International Standards Group (ISG) as well as the US Capital Markets Group for Securities and Exchange Commission (SEC) foreign registrants.
Global Services Centre (GSC)
The GSC's mission is to drive success for KPMG's network of Audit practices through collaboration, innovation and technology. The GSC develops, maintains and deploys KPMG's audit methodology and technology-based tools used by member firms' audit professionals. With three international locations, one in each region (Americas, EMA and ASPAC), the GSC Audit team is made up of professionals with backgrounds in audit, IT, data science, mathematics, statistics and more, from around the world, who bring diverse experiences and innovative ways of thinking to further evolve KPMG's audit capabilities.
More information about KPMG's global audit methodology and technology-based tools is included in the 'Innovating and evolving our audit processes' section of this report.
International Standards Group (ISG)
The ISG focuses on the application of International Financial Reporting Standards (IFRS) and International Standards on Auditing (ISAs). To promote consistency of interpretation of IFRS and ISAs between member firms, Topic Teams with geographic representation from around the world identify emerging issues and develop global guidance on a timely basis. In summary, the ISG:
The ISG also supports the Global ISA and IFRS Panels and the Global Topic teams to facilitate information sharing between the Department of Professional Practices (DPP) network (see below), and to help ensure sector-specific issues are dealt with proactively.
Member firm professional practice resource
Member firms provide consultation support on auditing and technical accounting matters to their audit professionals through professional practice resources (referred to as Department of Professional Practice or DPP). DPP also assists engagement teams where there are differences of opinion either within teams or with the engagement quality control (EQC) reviewer. Unresolved differences are required to be escalated to senior partners for final resolution. The ISG is also available for consultation when required.
KPMG policy prohibits involvement in any type of bribery — even if such conduct is legal or permitted under applicable law or local practice. We also do not tolerate bribery by third parties, including by member firm clients, suppliers or public officials. KPMG International requires member firms to have appropriate internal controls in place to mitigate the risk of involvement in bribery by the member firm and its partners and staff.
All KPMG member firm partners and staff are required to take training covering compliance with laws, regulations and professional standards, anti-bribery and corruption, and reporting suspected or actual non-compliance. Click to know more about KPMG lnternational's position on bribery and corruption.
KPMG has strict information security policies and procedures governing the handling of confidential client and personal information. All KPMG partners and staff must maintain confidentiality of all client and former client information, and are required to complete training in confidentiality, information protection and data privacy on an annual basis.
Honest and candid communication with clients, including management and audit committees, is a key aspect of our reporting and quality service delivery.
Communications with those charged with governance
We stress the importance of keeping clients 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 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.
KPMG's Global IFRS Institute provides information and resources to help board and audit committee members, executives, management, stakeholders and government representatives gain insight and access thought leadership about the evolving global financial reporting framework.
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 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 around 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.
Click to know further details and insights on the ACI.