No audit firm has paid more fines for poor-quality work than KPMG.
This morning, the FT reports:
KPMG's UK partners enjoyed their biggest payday last year as cost-cutting boosted the Big Four firm's profits in spite of slowing revenue growth.
Payouts for KPMG's UK partners climbed 9 per cent to an average of £816,000 for the year to the end of September, the firm said on Wednesday.
Such are the rewards for failure in the UK.
In the interests of full disclosure, I trained with what became KPMG, leaving in 1983.
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I suspect those KPMG partners do not see this as “failure” – their only metric of success is profit that can be paid out to partners; regulatory fines are just the “cost of doing business”.
“Back in the day” such ethical failures would destroy a business overnight. In my field (finance) Bankers Trust, a giant in the derivatives market was sold for a dollar (to Deutsche bank) after a mis-selling scandal (1999). Refco, the largest futures broker in the world went bust in 48 hours after an accounting slight of hand to hide bad debts was revealed (2005).
They went bust because customers did not want to do business with shady companies.
I am afraid to say the fact that companies (whether finance or accounting) which breach ethical standards today continue to stay in business because “we” still choose to do business with them.
Agreed
Thank you and well said, Richard.
Many former staff have senior positions at the Bank of England, supervision, and HSBC, regulatory policy and strategy, amongst other prominent organisations. Others have chaired the likes of the FCA*.
Two members of the Peat* family became keepers of the privy purse, i.e. heads of finance for the royals.
*Well connected toffs to help navigate KPMG’s regulatory issues.
It’s not healthy and, for a firm with that record, should rarely, if ever, be allowed.
Agreed
You post was mean spirited.
KPMG partners have important lifestyles that they need to keep up. These bonus need to be regarded not as pay-for-results but as pay-to-keep-up-the-lifestyle-of-partners (yachts & mistresses are not cheap you know!)
Where would the country be without the mental titans in KPMG and similar orgs that have done so very very much to get the UK to where it is now. Shame on you for questioning their probity and capabilities.
As I understand it – PWC KPMG etc are still selling consultancy services to companies they are supposed to audit. Surely a clear conflict of interest – not to sa y corruption?
They seem to be at the very heart of the City’s global money laundering model.
Funny how local councillors have to declare conflicts of interest before they can vote – but the nearer we get to the summit of financial or political power – the less regulation there seems to be.
There are now limitations on this, in fairness.
It depends what Richard means by “poor quality work”. KPMG have delivered exactly what the companies that employed them wanted. The fines are just a necessary part of doing the job to the customer’s satisfaction.
Below is a link to ‘This is Money’ article of 8 May 2019 which prompted me to take ICAEW to task over double standards. The then vice president of ICAEW was a partner in KPMG but no action was taken to remove him from his vice presidency when KPMG were fined for botched audits – another reward for failure. His excuse to me was that the audit clients concerned were not his clients – what became of his joint duty to care as a partner in KPMG whilst reaping the appropriate joint rewards? Some years before that I had attended a lecture (part of ongoing professional education) by an employee of the joint monitoring professional standards section of ICAEW – all attendees were ‘small practitioners’ and he commenced his lecture by telling us that we were all rotten ‘because we were small practitioners’ and yet we all had unblemished records – Richard has highlighted the fines received by ICAEW recently and here is the link to the 2019 debacle –
The £50m accounting racket: How the fines for botched audits go to an industry group fighting reform
The Institute of Chartered Accountants in England and Wales (ICAEW) has collected more than £50 million in fines levied on firms that botched audits.
https://www.thisismoney.co.uk/money/markets/article-7007323/The-50m-accounting-racket-fines-botched-audits-industry-group-fighting-reform.html?ito=email_share_article-top
I agree with you.
I never had event a hint of a PII claim or a succesful professional complaint (but did have some spurious ones) in my career as a chartered accountant.
thank you – ICAEW did not agree with me! – 2 things come to mind – 1st is that some allow greed to overtake principles which I find unprofessional – the 2nd is that maybe these bonuses are a reflection of some terminology now used within PLC (published and audited) Accounts where, in the past, directors have been used to receiving ‘remuneration’ but this term has sometimes been replaced with ‘compensation’ – thus these partners will be not paid for poor audit work, but compensated for it? Perhaps ‘E&OE’ should be added to their audit reports.
In my former profession, pre 1990, if you were a partner (and limited companies couldn’t legally practice), you were “jointly & severally” liable for one another’s actions, and debts, including personal ones. It was a heavy responsibility and you chose your partners carefully, and paid to insure them. Needless to say, the corporates have now moved in (>45% of my former profession now owned by large corporates) along with the insurance industry to cover escalating fees, and the profit gouging is in full swing on the high street. I’m glad I was in a new career when all that malarkey started.
As for accountancy, was Arthur Andersen the last “big” one to be closed down for ethical failure (although it looked more like a laundry exercise than a disciplinary one)?
If I was CFO of a huge company, where would I go for a competent and ethical audit, by a company with a clean regulatory record, yet big enough to do the job? (By clean I mean free of serious ethics violations, significant non-technical breaches of codes).
Is there such a clean firm or am I stuck with 4 big crooks?
It’s a joke. If only!
I’m struggling to find one to help me with a filling out a CGT box on next years tax form because I don’t even understand the questions let alone the answers, but it’s too small a job to get emails answered.
The ‘Big 4’ are ‘too big to fail’, and they know it.
If it is not already happening, might there be an improvement in the quality of work if all fines came directly from the “purses” and “wallets” of those in charge of the organisation?
In effect they do at KPMG
Why should KPMG worry when in this deeply corrupt country HMRC turns its back on a potential £1 billion of tax revenue?
https://www.theguardian.com/world/2025/jan/30/roman-abramovich-tax-affairs-investigated-mps-say-1bn
KPMG knows the country is run for the rich few with shill politicians falling over themselves to facilitate it!
Thank you.
We should be more worried about the likes of Dave Hartnett and Edward Troup at the Treasury and HMRC.