FRC fines KPMG for misconduct ... but it's not all bad news
Welcome to Daily Insight. I'm choosing two stories about 'big four' accounting firm KPMG to kick off the week. One good. One not so much.
First the bad news: The UK's accounting watchdog has fined KPMG about £3.2million for misconduct in audit work for an insurance tech group called Quindell.
KPMG partner William Smith was personally fined £84,000. And there were stern Financial Reporting Council words for both he and the company.
Criminal investigation
The Serious Fraud Office has also launched a criminal investigation into Quindell following several share-related scandals and a probe into its accounts by the Financial Conduct Authority in 2015.
The FRC said in a statement on Monday morning: "KPMG and Mr Smith, members of the Institute of Chartered Accountants in England and Wales (ICAEW), have admitted that their conduct fell significantly short of the standards reasonably to be expected of a Member and a Member Firm and that they failed to act in accordance with the ICAEW’s Fundamental Principle of Professional Competence and Due Care.
"The Misconduct related to two audit areas, and included failure to obtain reasonable assurance that the financial statements as a whole were free from material misstatement, failure to obtain sufficient appropriate audit evidence and failure to exercise sufficient professional scepticism."
Required standards
KPMG said in a statement: “We regret that some aspects of our audit for the year ended 31 December 2013 did not meet the required standards.”
It added that “certain information given to KPMG [by Quindell] contradicted representations previously made by former members of management. Nonetheless, we accept the FRC’s findings that in two specific areas of the audit, our challenge for the year ended 31 December 2013 should have gone further.”
I came across KPMG story number two in Accountancy Age ... It's all about KPMG's reverse mentoring scheme that was widened out earlier this year following a successful pilot in 2017.
Focus of the KPMG diversity scheme
The focus of the scheme is pairing partners with black heritage colleagues, so that those working at senior levels can better understand the workplace challenges of those from diverse backgrounds. The aim is to improve diversity and inclusion across the firm.
KPMG’s I&D senior lead, Edleen John says about the scheme: "It involves us enabling more senior employees to gain insights and understanding from some of our more junior employees, about their experiences, learnings and day to day life at KPMG.
"However, it’s atypical, it’s not like the usual mentoring where someone more senior imparts their wisdom and knowledge to somebody more junior.
"It focuses on the more junior employees imparting their knowledge to the more senior individuals; sharing information about their background, who they are and what it’s like working here at KPMG.
Sense of community
She adds: "I think it’s [the programme] enabled junior employees to feel a more of a sense of belonging to the organisation and feel like their voices are being heard, and to also build up a sense of community.
"As it’s a group of people who are all on the program at the same time, they are able to build up a broader network of like-minded employees than maybe they would have had exposure to before.
"Similarly through the various networking events taking place, even though they all have a direct mentor or mentee, they also have additional exposure to other partners so that’s been hugely positive."
