KPMG Statsautoriseret Revisionspartnerselskab - Transparency Report 2019/20 - assets.kpmg
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KPMG Statsautoriseret Revisionspartnerselskab Transparency Report 2019/20 Statsautoriseret Revisionspartnerselskab Dampfærgevej 28 2100 København Ø Denmark CVR no. 25 57 81 98 The Transparency Report was issued on 31 January 2021 kpmg.dk
Our relentless focus on quality
Contents
1. Message from Quality Leaders 5
2. Who we are 6
3. Legal and governance structure 7
4. Partner remuneration 11
5. Network arrangements 12
6. System of quality control 17
7. Declaration on quality control system and independence policy 44
8. Financial information 46
9. Appendices 47
A.1 KPMG in Denmark - Public Interest Entities 48
A.2 KPMG Audit entities located in the EU & EEA 49
Message from
01 Quality Leaders
Ensuring trust and growth through high quality audits is accountability across all our functions for the quality of
the cornerstone of our business and the basis on which each and every KPMG audit.
KPMG was founded.
22% growth overall including 9% growth in our Audit
KPMG's Global Chairman, Bill Thomas, has put it per- practice and 4,471 job applications in the year ended
fectly well saying "Without trust there is no growth, and 30 September 2020 is a testament to the trust we have
without quality there is no trust." earned in the market.
Trust and growth will be achieved through our relent- The COVID-19 pandemic has forced us all to think
less focus on Audit Quality and operational excellence. differently about how we engage our people, clients,
Quality is essentially about doing the right thing, at the stakeholders and the society. During the pandemic we
right time and it remains our highest priority. We know have amongst other things supported our clients in
that quality is delivered by our exceptional people having understanding potential accounting and disclosure impli-
access to the right knowledge at the right time while cations. We will continue to respond to and embrace the
being able to deploy industry leading technology and challenges related to uncertainty and risks due to the
innovative tools, such as KPMG Clara, under strong pandemic.
leadership and guidance.
In the Transparency Report, we provide insight into and
Responsibility for audit quality starts at the top and report on a number of significant matters regarding our
through our culture which means driving and reinforcing Firm. We disclose information on our legal structure and
accountability through the complete chain of command ownership, governance structure and partner remuner-
in all our teams and practices, so that every action helps ation. We describe the global network that we are a part
us meet our rigorous audit quality objectives. of – including the responsibilities and obligations of the
member firm and our values – and our system of quality
Our purpose-driven culture is essential in promoting control, which is based on KPMG International’s Audit
high quality. We articulate purpose, and through that Quality Framework.
everyone's contribution to our overall purpose of fulfill-
ing our commitment to the public and our clients. We are committed to working closely together with
regulators, our clients, their investors and businesses to
Stringent processes are set in place to ensure that meet expectations for audit quality.
every level of our business fulfils its duty and meets our
strict audit quality objectives. We are driving consistent We hope that you will find that our report provides use-
awareness across our Firm of what audit quality is and ful insight into our Firm and our approach to ensure at all
how it can be measured. Through rigorous practice times high quality.
management controls focusing on centralisation, stan-
dardisation, automation and innovation followed by Copenhagen, 31 January 2021
strong monitoring we are ensuring that there is KPMG
Statsautoriseret Revisionspartnerselskab
Henrik R. Mulvad Lau Bent Baun Henrik Barner Christiansen
CEO and Senior Partner Head of Audit & Partner Quality & Risk Management Partner
Transparency Report 2019/20 5
who
02 we are
Our business This Transparency Report describes the govern-
KPMG Statsautoriseret Revisionspartnerselskab, ance structure and the system of quality control of
commercial name: KPMG P/S (“KPMG”), KPMG KPMG. The governance structure and the system of
Acor Tax Partnerselskab (“KPMG Acor Tax”) and quality control of the legal entities KPMG Acor Tax
KPMG Law Advokatfirma (“KPMG Law”) are and KPMG Law is not included in this report.
professional services firms that deliver audit, tax,
advisory and legal services to a wide variety of For further information about our business and
Danish businesses – from small entrepreneurs to performance for the year ended 30 September
large international groups as well as foundations, 2020, we refer to our annual report.
associations, municipalities and public institutions.
All three firms are Danish member firms of KPMG
International.
Our strategy
KPMG, KPMG Acor Tax and KPMG Law operate Our strategy is set by the Board of Directors in
out of seven offices across Denmark and had an close cooperation with the Leadership Team and
average of 759 employees and partners in the year the Partner Group and demonstrates a commit-
ended 30 September 2020. ment to quality culture and trust. Our focus is to
invest significantly in priorities that form part of a
Our audit services in Denmark are delivered multi-year collective Global Audit Transformation
through KPMG. Full details of the professional ser- Quality process that takes place across our entire
vices offered by KPMG, KPMG Acor Tax and KPMG global organisation.
Law can be found on our websites.
For further information about our strategy, we refer
KPMG Acor Tax and KPMG Law are limited liabi- to our annual report for the year ended 30 Septem-
lity partnerships owned by those firm's partners. ber 2020.
The firm’s provides tax and legal services under
the KPMG brand in Denmark. KPMG Acor Tax
and KPMG Law are not licensed to operate as
audit firms, and there are no ownership interests
between KPMG Acor Tax, KPMG Law or KPMG.
Legal and
03 governance structure
Affiliation with KPMG International and other
Legal structure, name and ownership KPMG member firms
KPMG is a limited liability partnership owned by the KPMG Statsautoriseret Revisionspartnerselskab is part
Audit and Advisory Partners. Pursuant to the Danish of a global network of professional services firms pro-
Auditors Act, the majority of votes is held by state viding audit, tax and advisory services to a wide variety
authorised public accountants. of public and private sector organisations. The KPMG
organisation structure is designed to support consis-
During the financial year ending 30 September 2020, tency in service quality and adhere to agreed values
KPMG had an average of 29 equity partners. wherever its member firms operate.
Further details about KPMG International and its busi-
ness activities, including our relationship with it, are
described on page 12 Network Arrangements and in the
‘Governance and leadership’ of the KPMG International
Transparency Report.
Partners Partners’ holding
companies Governance structure
KPMG is owned, governed and operated by the part-
ners. Details about the role and responsibilities and
composition of each of the key bodies in our governance
structure are set out below. Responsibilities relating to
our quality control system are included in the following
descriptions:
KPMG The Board of Directors
Komplementarselskab ApS
Pursuant to the Danish Companies Act, the Board of
Directors is responsible for overall and strategic man-
agement and for the proper organisation of KPMG by
ensuring that
• adequate risk management and internal control pro-
cedures have been established, including a system
Statsautoriseret of quality control pursuant to ISQC 1
Revisionspartnerselskab
• the Senior Partner and the Leadership Team perform
their duties properly and as directed by the Board of
Directors.
Transparency Report 2019/20 7
The members of the Board of Directors are elected at a The current Senior Partner, Henrik R. Mulvad, was
shareholder's meeting for a two-year term. The Board appointed in January 2019 for a five-year term, which
members can – as a starting point - be re-elected for a ends on 31 January 2024. Re-election can take place.
maximum period of six years. The Board members can-
not be members of the Leadership Team. The majority The Senior Partner is registered with the Danish Busi-
of the Board of Directors are required to be approved ness Authority as the Executive Board of KPMG.
auditors.
Based on a vote in the Partner Group, the Board of Leadership Team
Directors appoints the Senior Partner, who is responsi- The Senior Partner heads up the Leadership Team and
ble for the day-to-day management of KPMG. Further- determines the roles and responsibilities within the
more, the Board of Directors is responsible for determin- members of the Leadership Team.
ing the remuneration of the Senior Partner.
The Leadership Team comprises the following
Upon the recommendation of the Leadership Team, the members:
Board of Directors will invite individuals to become new
partners and submit their appointment for approval at • Henrik R. Mulvad, Senior Partner
a general shareholders' meeting. The Board of Direc- • Lau Bent Baun, Head of Audit, Partner,
tors shall also, on recommendation by the Leadership State Authorised Public Accountant
Team, propose the resignation of Partners to the general • Morten Mønster, Head of Advisory, Partner.
meeting.
The two heads of the client service function’s (Audit and
The Board of Directors comprises the following mem- Advisory) are accountable to the Senior Partner for the
bers: quality of service delivered in their respective functions.
They work with the Quality & Risk Management Partner
• Anja Bjørnholt Lüthcke, Chairperson, Partner, State on monitoring and addressing quality and risk matters as
Authorised Public Accountant they relate to their function.
• Niels Vendelbo, Partner, State Authorised Public
Accountant The Leadership Teams of KPMG, KPMG Acor Tax and
• David Olafsson, Partner, State Authorised Public KPMG Law work closely together in order to ensure
Accountant effective coordination of all relevant matters including
• Bo Johansen, Partner quality, integrity and independence.
• Danny Golan, Partner.
The Leadership Team's primary responsibility includes
ensuring that the day-to-day activities are managed
The Senior Partner effectively, including that relevant matters are coordinat-
In capacity as Chief Executive Officer, the Senior ed, policies are set up and observed, quality is main-
Partner has the overall responsibility for the day-to-day tained, and legislation is complied with.
management of KPMG including the day-to-day over-
sight of our system of quality control and must, together The Leadership Team has regular meetings with the
with the Leadership Team, follow all relevant and lawful Quality & Risk Management Partner covering current
guidelines and instructions set by the Board of Directors. and emerging quality issues, if any, including issues
that have been identified in external and internal quality
The Senior Partner also appoints the Quality & Risk reviews of engagement teams, etc. At the meetings,
Management Partner based on consultation with the there are also discussions of root cause analyses per-
Board of Directors and KPMG International. formed on identified issues and action plans that have or
are to be developed to address identified issues.
Transparency Report 2019/20 8The Leadership Team is also responsible for setting the Further information regarding partner remuneration is
performance-based remuneration to Partners. As part of set out on page 11.
its activities, the Leadership Team receives and consid-
ers a quality memo prepared by the Quality & Risk Man- Quality & Risk Management Partner
agement Partner for each individual partner based on The Quality & Risk Management Partner is appointed
quality and compliance metrics. This memo concludes by the Senior Partner in consultation with the Board of
on whether there are any quality matters that should Directors and KPMG International and reports at least
have a negative impact on the performance-based annually to the Board of Directors. The Quality & Risk
remuneration of each partner. The Leadership Team's Management Partner reports directly to the Senior
assessment of the performance-based remuneration of Partner and also regularly participates in Leadership
each partner is subject to the Compensation Commit- Team meetings where quality and risks-related topics
tee's review as further described below. are discussed and assessed. Furthermore, the Quality
& Risk Management Partner reports to Regional and
Compensation Committee Sub-regional Quality & Risk Management Partners with-
The Compensation Committee consists of four part- in KPMG International on a regular basis.
ners, who are elected at a shareholders' meeting for a
period of two years. The members of the Compensation The Quality & Risk Management Partner is responsible
Committee can be re-elected for a maximum period of for the direction and execution of the system of quality
four years. No member of the Board of Directors or the control, risk management and compliance in KPMG
Leadership Team, including the Senior Partner, are eligi- including oversight of quality and risk management mat-
ble for election for the Compensation Committee. ters across the Firm. The Quality and Risk Management
Partner also oversees that a culture of quality and in-
The Compensation Committee is responsible for: tegrity is maintained within the Firm, develops poli-
cies and procedures relating to professional risk man-
• establishing and implementing principles and guide- agement, ethics and independence, quality control
lines for fixed and performance-based remuneration and compliance and considers the impact of findings
of Partners; from compliance quality monitoring programs and the
• reviewing and approving the amount and composi- adequacy and implementation of proposed remedial
tion of remuneration to the Partners is in accordance actions.
with the principles and guidelines;
• handling any complaints or disputes related to remu- The Quality & Risk Management Partner also acts as the
neration or the compensation principle. Ethics & Independence Partner with responsibility for
the direction and execution of our ethics and indepen-
The Compensation Committee comprises the following dence policies and procedures.
members:
The Quality & Risk Management Partner, Henrik Barner
• Jakob Blicher-Hansen, Chairperson, Partner Christiansen, Partner and State Authorised Public
• Klaus Rytz, Partner, State Authorised Public Accountant, was appointed to this role on 1 January
Accountant 2020.
• Jan Hove Sørensen, Partner
• Michael Sten Larsen, Partner, State Authorised
Public Accountant.
Transparency Report 2019/20 9Partner
04 remuneration
Partners are remunerated based on the allocation of ation to the Partners in accordance with our Partner-
profits generated by KPMG and are personally liable ship Compensation Principles.
for funding their pensions and most other benefits.
There are three components to partner remunera-
According to our Partnership Agreement, principles tion:
and guidelines for fixed and performance-based
remuneration of Partners (the "Partnership Compen- • base component – a proportion of the budgeted
sation Principles") are proposed by the Compensa- profit is allocated to Partners as a base compo-
tion Committee and approved by the Partner Group. nent; this is effectively on-account monthly part-
ner salary. The amount of the base component
The Partners' individual Key Performance Indica- reflects the role and seniority of each partner as
tors are set by the Leadership Team and reassessed well as the historic performance and individual
each year. These indicators also include quality and potential,
compliance metrics. • performance component – rewards performance
in the year by each partner against individual
The final allocation of profits to partners, except for objectives previously agreed based on our Key
the Senior Partner, is made by the Leadership Team Performance Indicators including quality of work,
after assessing each partner’s performance during excellence in client service, growth in revenue
the year. and profitability, leadership and living the values
of KPMG. Audit partners are not permitted to
The Board of Directors evaluates the performance have objectives related to, or receive any remu-
of the Senior Partner and decides on the amount of neration from, selling non-audit services to their
remuneration to the Senior Partner in accordance audit clients. In addition, a part of their perfor-
with our Partnership Compensation Principles. mance-related component is based on an assess-
ment of their ability to deliver audit quality.
The Compensation Committee reviews and • One-firm profit component based on the overall
approves the amount and composition of remuner- profit of KPMG.
Transparency Report 2018/19 11Network
05 arrangements
KPMG International is an entity that is legally separate
Legal structure from each member firm. KPMG International and the
member firms are not a global partnership, joint venture,
Legal structure and ownership until or in a principal or agent relationship or partnership with
30 September 2020 each other. No member firm has any authority to obli-
KPMG Statsautoriseret Revisionspartnerselskab was gate or bind KPMG International or any other member
until 30 September 2020 affiliated with KPMG Inter- firm vis-à-vis third parties, nor does KPMG International
national Cooperative (“KPMG International”). KPMG have any such authority to obligate or bind any member
International Cooperative is a Swiss cooperative which firm.
is a legal entity formed under Swiss law. Prior to 1
October 2020 KPMG International Cooperative was the
coordinating entity for the network and the entity with Legal structure and ownership from
which all the member firms of the KPMG organisation 1 October 2020
were required to be affiliated with. On 1 October 2020, KPMG Statsautoriseret Revisions-
partnerselskab and all other KPMG firms entered into
KPMG is the registered trademark of KPMG Interna- a new membership agreement. The key impact of the
tional and is the name by which the member firms are change is that all KPMG member firms in the KPMG
commonly known. The rights of member firms to use global organisation became members in, or have other
the KPMG name and marks are contained within agree- legal connections to, KPMG International Limited
ments with KPMG International. (“KPMG International”), an English private company
limited by guarantee.
Member firms are generally locally owned and man-
aged. Each member firm is responsible for its own KPMG International acts as the coordinating entity for
obligations and liabilities. KPMG International and other the overall benefit of the KPMG member firms. It does
member firms are not responsible for a member firm’s not provide professional services to clients. Professional
obligations or liabilities. services to clients are exclusively provided by member
firms.
In Denmark KPMG have three member firms (KPMG,
KPMG Acor Tax and KPMG Law) and each separate Further detail on the revised legal structure and govern-
legal entity is responsible only for its own obligations ance arrangements for the KPMG global organisation
and liabilities, unless it has expressly agreed otherwise. from 1 October 2020 can be found in section ‘Gover-
Transparency Report 2019/20 12nance and leadership’ of the 2020 KPMG International Transparency Report. KPMG International and the KPMG member firms are not a global partnership, multinational corporation, joint venture, or in a principal or agent relationship or partner- ship with each other. No member firm has any authority to obligate or bind KPMG International, any of its related entities or any other member firm vis-à-vis third par- ties. Nor does KPMG International or any of its related entities have any such authority to obligate or bind any member firm. The name of each audit firm that is a member of the organisation and resides in an EU/EEA country is availa- ble in Appendix A.2. Responsibilities and obligations of member firms Pursuant to their membership agreements with KPMG International, KPMG firms are required to comply with KPMG International’s policies, procedures and regula- tions including quality standards governing how they operate and how they provide services to clients to com- pete effectively. This includes having a firm structure that ensures continuity and stability and being able to adopt global strategies, share resources (incoming and outgoing), service multi-national clients, manage risk and deploy global methodologies and tools. Each KPMG firm takes responsibility for its manage- ment and the quality of its work. Member firms commit to a common set of KPMG Values. KPMG International’s activities are funded by a levy paid to it by member firms. The basis for calculating such amounts is approved by the Global Board and consis- tently applied to the firms. A firm’s status as a KPMG member firm and its participation in the KPMG global organisation may be terminated if, among other things, it has not complied with the policies and regulations set by KPMG International or any of its other obligations owed to KPMG International. Transparency Report 2019/20 13
One of the other Global Board members is elected as
Professional indemnity insurance the lead director by those Global Board members who
A substantial level of insurance cover is maintained in are not also members of the Executive Committee of
respect of professional negligence claims. The cover the Global Board (“non-executive” members). A key
provides a territorial coverage on a worldwide basis and role of the lead director is to act as liaison between the
is principally written through a captive insurer that is Global Chairman and the “non-executive” Global Board
available to all KPMG member firms. members.
Global Management Team
Governance structure The Global Board has delegated certain responsibilities
The key governance and management bodies of KPMG to the Global Management Team. These responsibili-
International are the Global Council, the Global Board ties include developing the global strategy by working
and the Global Management Team. together with the Executive Committee and jointly
recommending the global strategy to the Global Board
Global Council for its approval. The Global Management Team also sup-
The Global Council focuses on high-level governance ports the member firms in their execution of the global
tasks and provides a forum for open discussion and strategy and is responsible for holding them accountable
communication among member firms. for commitments.
It performs functions equivalent to a shareholders’ It is led by the Global Chairman and includes the Global
meeting (albeit KPMG International has no share capital Chief Operating Officer, Global Chief Administrative
and only has members, not shareholders). Officer, global function and infrastructure heads, the
Global Head of Quality, Risk and Regulatory and the
Among other things, the Global Council elects the General Counsel.
Global Chairman and also approves the appointment of
Global Board members. It includes representation from The list of current Global Management Team members
61 KPMG member firms that are “members” of KPMG is available in the KPMG’s Global Review, which can be
International as a matter of Swiss law. Generally, Subli- found here.
censee firms are indirectly represented by a member.
Global Steering Groups
Global Board There is a Global Steering Group for each key function
The Global Board is the principal governance and and infrastructure area chaired by the relevant mem-
oversight body of KPMG International. The key respon- ber of the Global Management Team in discharging its
sibilities of the Global Board include approving global responsibilities. In particular, the Global Audit Steering
strategy, protecting and enhancing the KPMG brand Group and Global Quality & Risk Management Steering
and reputation, overseeing of the Global Management Group work closely with regional and member firm
Team and approving policies with which KPMG firms are leadership to:
required to comply.
• establish and ensure communication of appropriate
The Global Board includes the Global Chairman, the audit and quality/risk management policies;
Chairman of each of the three regions (the Americas; • establish and support effective and efficient risk
Asia Pacific (ASPAC); and Europe, the Middle East, processes to promote audit quality;
and Africa (EMA)) and a number of senior partners of • promote and support strategy implementation in
member firms. member firms’ audit functions, including standards
of audit quality; and
It is led by the Global Chairman and also includes the • assess and monitor audit quality issues, including
Chairman of each of the regions and a number of other those arising from quality performance and regulato-
member firm senior partners. The list of current Global ry reviews, and focus on best practices that reduce
Board members is available here. audit quality findings.
Transparency Report 2019/20 14The roles of the Global Audit Steering Group and the Significant activities of the ARL, including member firm
Global Quality & Risk Management Steering Group are issues identified and related member firm response/
detailed in the KPMG International Transparency Report. remediation, are reported to GQ&RM leadership.
Each firm is part of one of the three regions (the Amer- The objectives of the ARL role are to:
icas, ASPAC, and EMA). Each region has a Regional
Board comprising a regional chairman, regional chief • assist GQ&RM leadership in the monitoring of
operating or executive officer, representation from any Member Firm’s quality and risk activities in an effort
sub-regions, and other members as appropriate. Each to reduce the number of significant brand and legal
Regional Board focuses specifically on the needs of risk matters;
member firms within their region and assists in the • work with GQ&RM leadership and the International
implementation of KPMG International’s policies and Office of General Counsel (IOGC) when significant
processes within the region. brand and legal risk issues occur to assist in ensuring
that matters are properly handled to reduce negative
Further details about KPMG International, including the brand and financial impact; and
governance arrangements, for the year ending 30 Sep- • assist in monitoring the effectiveness of Firm reme-
tember 2020 can be found in the KPMG International diation of significant issues, including identification
Transparency Report. of the root cause(s) of serious quality incidents.
Area Quality & Risk Management Leaders (ARL)
The Global Head of Quality, Risk and Regulatory
appoints Area Quality & Risk Management Leaders who
serve a regular and ongoing monitoring and consultation
function to assess the effectiveness of a member firm’s
efforts and processes to identify, manage and report
significant risks that have the potential to damage the
KPMG brand.
Transparency Report 2019/20 15Transparency Report 2018/19 16
System of
06 quality control
The Danish Auditors Act and the international standard by the International Auditing and Assurance Standards
ISQC 1 stipulates that audit firms must have a quali- Board (IAASB) and on the Code of Ethics for Profession-
ty control system covering the issuance of auditors' al Accountants issued by the International Ethics Stan-
reports on financial statements and other assurance dards Board for Accountants (IESBA), KPMG Interna-
reports. tional's quality control policies that apply to all member
firms and procedures and additional requirements in the
The audit firm must be able to document that the quality Danish Auditors Act and EU regulations.
control system is used. This means that the system
must be available either in written or electronic format These policies and associated procedures are designed
and that it must be available to reviewers in connection to assist our people comply with relevant professional
with inspections performed. standards, regulatory and legal requirements and issue
reports that are appropriate in the circumstances as well
At KPMG, audit quality is not just about reaching as to assist our people act with integrity and objectivity
the right opinion, but how we reach that opinion and and perform their work with diligence.
document it. It is about the processes, thoughts, and
integrity behind the audit report. KPMG views the out- Amendments to KPMG International's risk and quality
come of a quality audit as the delivery of an appropriate policies, including ethics and independence policies, are
and independent opinion in compliance with the auditing included in Quality and Risk Management Alerts. KPMG
standards. This means, above all, being independent, implements all changes communicated from KPMG
and compliant with relevant legal and professional International or changes based on new requirements
requirements. in legislation or standards. The changes are reviewed
through internal monitoring.
Tone at the top, leadership, and a clear set of values and
conduct are essential to set the framework for quali- Quality control and risk management are the responsi-
ty. However, these are required to be backed up by a bility of all KPMG partners and employees. This respon-
system of quality control that ensures our performance sibility includes the need to understand and adhere to
meets the highest professional standards. firm policies and associated procedures in carrying out
their day-to-day activities. The system of quality control
Our policies and procedures are based on the Interna- applies to KPMG partners and employees wherever
tional Standard on Quality Control 1 (ISQC 1) issued they are based.
Transparency Report 2019/20 17We are in the process of implementing the new interna- all KPMG member firms. All of the other drivers create
tional standard on quality management (ISQM 1), which a virtuous circle because each driver is intended to rein-
was approved by the IAASB in September 2020 and is force the others. Each of the seven drivers is described
expected to be effective from December 2022. ISQM in more detail in the following sections:
1 requires each KPMG firm to design, implement and
operate a System of Quality Management to consis-
tently deliver quality audits, and to evaluate the effec- 1. Culture and tone at the top - the
tiveness of the system on an annual basis. foundation of audit quality
While this Transparency Report summarises the
approach to audit quality, it may also be useful for stake-
holders interested in member firms’ Tax and Advisory Association with
the right clients
services, as many KPMG quality control procedures and
processes are cross-functional and apply equally to all
services offered. Commitment
to continous Clear standards
improvement androbust tools
To assist all audit professionals concentrate on the fun-
damental skills and behaviours required to deliver quality Culture and
audit, KPMG International developed the Audit Quality
Framework. tone at the top Recruitment,
Performance development and
of effective assignment of
This framework introduces a common language that is and efficient appropriate
engagements qualified
used by all KPMG member firms to describe what they personnel
believe drives audit quality and to highlight how each of Commitment to
technical excellence
their audit professionals contributes to the delivery of and quality service
audit quality. delivery
Our Audit Quality Framework identifies seven drivers of
audit quality: A culture based on quality, integrity and ethics is essen-
tial in an organisation that carries out audits and other
services on which stakeholders and investors rely.
Association with At KPMG we promote a culture in which consultation is
the right clients
encouraged and recognised as a strength.
Commitment
Clear standards
Tone at the top means that KPMG leadership demon-
to continous
improvement androbust tools strates commitment to quality, ethics and integrity and
communicates its commitment to clients, stakeholders,
Culture and and society at large to earn public trust.
tone at the top Recruitment,
KPMG’s commitment to integrity and quality is
Performance development and enshrined in the KPMG Values that lie at the heart and
of effective assignment of
and efficient appropriate
the soul of the way we do things. They define KPMG’s
engagements qualified
personnel
diverse and inclusive culture and our commitment to the
Commitment to
right personal and professional conduct emphasising
technical excellence that, above all, KPMG people act with integrity. The
and quality service
delivery KPMG Values are communicated clearly to all people
and are embedded into member firms’ people pro-
cesses — induction, performance development and
"Culture and Tone at the top" sits at the core of the Audit reward.
Quality Framework’s seven drivers of audit quality and
helps ensure that the right behaviours permeate across
Transparency Report 2019/20 18The KPMG Values are set out below:
Our Values represent what we believe in, and what is important to us as an organisation. They guide
our behaviours day-to-day, informing how we act, the decisions we make, and how we work with each
other, our clients, companies that we audit, and all our stakeholders.
Integrity We do what is right.
Excellence We never stop learning and improving.
Courage We think and act boldly.
Together We respect each other and draw strength
from our differences.
For Better We do what matters.
We are committed to our communities We act as responsible corporate citizens by
broadening our skills, experience, and per-
spectives through work in our communities
and protecting the environment.
Our Values express our firm’s long-standing core beliefs, and in 2020 the language was updated to
make them bolder, simpler, and more memorable to help each of us bring them to life every day.
Outlined in KPMG’s Global Code of Conduct are the Everyone at KPMG is required to comply with the Global
responsibilities all KPMG people have to each other, our Code of Conduct and to confirm their compliance with
clients, and the public. It shows how our Values inspire the Code and everyone at KPMG is also required to take
our greatest aspirations and guide all our behaviours regular training covering the Code. We are committed
and actions. It defines what it means to work at and be to holding ourselves accountable for behaving in a way
part of KPMG, as well as our individual and collective that is consistent with the Code.
responsibilities.
Individuals are encouraged to speak up if they see
Our Values lie at the heart of the way we do things. To something that makes them uncomfortable or that is
do the right thing, the right way. Always. They drive our inconsistent with our Values.
daily behaviours, guide our decisions, and shape our
actions. They form the foundation of a resilient culture Moreover, everyone at KPMG is responsible for
ready to meet challenge with integrity, so we never reporting and is required to report any activity that could
lose sight of our principal responsibility to protect public potentially be illegal or in violation of our Values, KPMG
interest. And they propel us forward — through our policies, applicable laws, regulations or professional
work and the example we set — as we inspire confi- standards.
dence and empower change throughout the world.
Transparency Report 2019/20 19To safeguard this, each KPMG firm is required to have
procedures and established channels of communication
2. Association with the right clients
so that anyone working there can report suspected
ethical and quality issues or concerns.
In addition, the KPMG International hotline (link available
at our homepage) is a mechanism for KPMG personnel, Association with
the right clients
clients and other third parties to confidentially report
concerns they have relating to certain areas of activity
Commitment
by any KPMG International entity, activities of KPMG to continous Clear standards
improvement androbust tools
firms or KPMG personnel.
All KPMG firms and personnel are prohibited from Culture and
retaliating against individuals who have the courage to
speak up in good faith. Retaliation is a serious violation
tone at the top Recruitment,
Performance development and
of the Code, and any who takes retaliatory action will be of effective assignment of
and efficient
subject to their firm’s disciplinary policy. engagements
appropriate
qualified
personnel
At KPMG, we regularly monitor the extent to which our Commitment to
technical excellence
people feel that the Firm lives the KPMG Values through and quality service
delivery
the Global People Survey.
Leadership responsibilities for quality and risk Acceptance and continuance of clients and
management engagements
KPMG demonstrates commitment to quality, ethics Rigorous global client and engagement acceptance and
and integrity and communicates our focus on quality to continuance policies are vital to being able to provide
clients, stakeholders and society. Our leadership plays high-quality professional services.
a critical role in setting the right tone and leading by
example demonstrating an unwavering commitment KPMG's client and engagement acceptance and contin-
to the highest standards of professional excellence and uance policies, and processes are designed to identify
championing and supporting major initiatives. and evaluate any potential risks prior to accepting or
continuing a client relationship or performing a specific
Our leadership team is committed to building a culture engagement.
based on quality, integrity and ethics, demonstrated
through their actions, written and video communica- KPMG firms are required to evaluate whether to accept
tions, presentations to teams and one-to-one discus- or continue a client relationship or perform a specific
sions. engagement. In circumstances where certain client/
engagement acceptance (or continuance) decisions
The bodies and individuals with leadership responsi- pose significant risks, additional approval processes are
bilities for quality and risk management at KPMG are required.
described in the Governance section above.
Prospective client and engagement evaluation process
Before accepting a client, we undertake an evaluation
of the prospective client, so we are able to make an
informed acceptance decision. This evaluation includes
completing a questionnaire to assess the client's risk
Transparency Report 2019/20 20profile and obtaining background information on the standards and our policies or if there are any other quali-
client, its key management, directors and owners. In ty and risk issues that cannot be appropriately mitigated.
addition, we obtain additional information required to
satisfy our local legal or regulatory requirements. As Continuance process
part of the client acceptance process, a central AML KPMG undertakes an annual re-evaluation of all its audit
Desk Team performs a detailed review and check of the clients. The re-evaluation identifies any issues in relation
information in the client acceptance including obtaining to continuing association and any mitigating procedures
required identification documentation from beneficial that need to be put in place (this may include the assign-
owners of the client in accordance with the rules of the ment of additional professionals such as an Engagement
Danish Anti-Money Laundering Act. Quality Control (EQC) reviewer or the need to involve
additional specialists on the audit).
Each prospective engagement is also evaluated to
identify potential risks in relation to the engagement. A Recurring or long-running non-audit engagements are
range of factors are considered as part of this evaluation, also subject to periodic re-evaluation.
including potential independence and conflict of interest
issues using Sentinel™, (KPMG’s global conflicts of In addition, clients and engagements are required to be
interests and independence checking system), intended re-evaluated if there is an indication that there may be a
purpose and use of engagement deliverables, public change in their risk profile, and as part of the continuous
perception as well as factors specific to the type of independence evaluation process, engagement teams
engagement. For audit services, these include the are required to identify if there have been any chang-
competence of the client’s financial management team es to previously identified threats or if there are new
and the skills and experience of partners and employees threats to independence. The threats are then evaluated
assigned to staff the engagement. The evaluation is and, if not appropriate safeguards are applied to reduce
made in consultation with other senior KPMG partners the threats to an acceptable level, a withdrawal process
and employees and includes review by Quality and Risk may be initiated.
Management Leadership as required.
Where audit services are to be provided for the first Withdrawal process
time, the prospective engagement team is required to Where KPMG comes to a preliminary conclusion that
perform additional independence evaluation procedures, indicates that we should withdraw from an engagement
including a review of any non-audit services provided to or a client relationship, we consult internally and identify
the client and of other relevant business, financial and any required legal, professional and regulatory responsi-
personal relationships. bilities. We also communicate as necessary with those
charged with governance and any other appropriate
Similar independence evaluations are performed when authority.
an existing audit client becomes a public interest entity
or additional independence restrictions apply following a
change in the circumstances of the client. Client portfolio management
Our leadership appoints engagement partners who
Depending on the overall risk assessment of the pro- have the appropriate competence, capabilities, time and
spective client and engagement, additional safeguards authority to perform the role for each engagement.
may be introduced to help mitigate the identified risks.
Any potential independence or conflict of interest issues The Head of Audit in consultation with the Quality &
are required to be documented and resolved prior to Risk Management Partner reviews each audit partner’s
acceptance. client portfolio in individual discussions with the audit
partner. The reviews consider the industry, nature and
A prospective client or engagement will be declined if risk of the client portfolio as a whole, and along with the
a potential independence or conflict issue cannot be competence, capabilities and capacity of the partner,
resolved satisfactorily in accordance with professional deliver a quality audit for each client.
Transparency Report 2019/20 223. Clear standards and We have issued extensive guidance to assist teams in
robust audit tools addressing the various accounting, financial reporting
and audit related matters arising from the impacts of
the COVID-19 pandemic including going concern, asset
impairments, valuations and related disclosures, mate-
Association with riality, risk assessment, group audits, inventory, sub-
the right clients
sequent events, audit evidence communications with
Those Charged with Governance, and considerations for
Commitment remote working environments.
to continous Clear standards
improvement androbust tools
KPMG’s guidance has been continually updated
Culture and throughout the pandemic as other significant auditing,
tone at the top Recruitment,
accounting and reporting issues have been identified.
Performance development and KPMG is a technology-enabled organisation, with all
of effective assignment of
and efficient appropriate audit technical accounting and auditing resources,
engagements qualified
personnel
guidance and audit platforms and tools available elec-
Commitment to
tronically, enabling the conversion to a remote working
technical excellence
and quality service
environment.
delivery
Communication has been increasingly important to
everyone during the COVID-19 pandemic. We have
leveraged our investments in technology to provide
Our professionals are expected to adhere to KPMG regular updates, including virtual meetings to share best
policies and procedures, including independence practices and guidance.
policies, and are provided with a range of tools
and guidance to support them in meeting these
expectations. The policies and procedures set for audit Consistent audit methodology and tools
engagements incorporate the relevant requirements Bringing consistency through our methodology
of accounting, auditing, ethical and quality control Our audit methodology, tools and guidance are:
standards and other relevant laws and regulations. • globally consistent and fully compliant with the
applicable standards, including International Stan-
dard on Auditing (ISA), Public Company Accounting
KPMG’s commitment to audit quality during the Oversight Board (PCAOB) and the American Insti-
COVID-19 pandemic tute of CPAs (AICPA) and are supplemented with
The COVID-19 pandemic has forced us all to think additional requirements applicable in Denmark
differently. We continue to respond to and embrace this • inclusive of KPMG methodology interpretations
challenge in our entire organisation. Most organisations that drive consistency in areas where the applicable
are likely to be impacted by the COVID-19 pandemic, standards are not prescriptive in the approach to be
either directly or indirectly, and the increased econom- followed
ic uncertainty and risk may have significant financial • centred on identifying risk, focusing on risks of
reporting implications. Issues including going concern, material misstatements and the necessary audit
asset impairments and valuations will require careful response
judgment as organisations deal with a high degree of • made available to all KPMG audit professionals and
uncertainty and market volatility. Our role as auditors is required to be used, where necessary.
among other duties to evaluate these judgements.
The KPMG audit methodology is set out in KPMG’s
Since the beginning of the pandemic we have main- Audit Manual and the KPMG Audit Execution Guide and
tained an online COVID-19 | Financial Reporting includes additional requirements that go beyond the
Resource Centre to assist companies and other stake- ISAs, which we believe enhances audit quality.
holders understand potential accounting and disclosure Our methodology also includes additional requirements
implications. applicable in Denmark.
Transparency Report 2019/20 23The methodology emphasises applying appropriate upwards and provide us with the platform to build in
professional scepticism in the execution of audit pro- continuous enhancements as the power of new tech-
cedures and requires compliance with relevant ethical nologies develops.
requirements, including independence.
We have laid the platform for this already with the
Enhancements to the audit methodology, guidance and launch of our smart audit platform, KPMG Clara.
tools are made regularly to maintain compliance with
the standard’s and address emerging auditing areas of Audit solutions for today’s world
focus and audit quality results (internal and external). We recognise that in order to deliver quality audits, we
For example, as a result of the COVID-19 pandemic, must continually evolve and develop our technology
many companies are experiencing significant financial solutions to keep pace with today’s digital world.
uncertainty. We have issued guidance to our auditors
conducting audit procedures in a remote-working envi- That is why we embarked on a process of reimagin-
ronment, raising awareness of key audit risks such as ing our audit platform, workflow and methodology to
going concern and impairments and provided reminders provide enhanced consistency and support to our audit
of the importance of exercising professional scepticism engagement teams, deliver more detailed insights to our
taking appropriate actions if information is identified that clients, and future-proof our systems for the expected
is unexpected or unusual and may be indicative of poten- continued development of new technologies such as
tial management bias, a fraud risk or fraud. robotic process automation, machine learning and cogni-
tive technologies.
Delivering through our current audit workflow
The current KPMG audit is enabled through eAudIT, an The continuation of this process will see a new work-
activity-based workflow and electronic audit file. eAudIT flow and revised audit methodology embedded into the
is KPMG’s audit documentation workflow that allows KPMG Clara platform. Limited deployment of the new
professionals to complete quality and consistent audits. “KPMG Clara workflow” took place during 2019, and full
eAudIT integrates KPMG’s audit methodology, guidance deployment globally started in 2020 and is expected to
and industry specific, and the tools needed to execute be completed by the end of 2022.
and document the audit work performed.
The release of the KPMG Clara workflow and revised
eAudIT can be “scaled” to present the relevant require- audit methodology is an important milestone in KPMG’s
ments and guidance, depending on the nature of the journey to innovate, digitalise and transform the audit
entity to be audited and in accordance with profes- experience for our people.
sional standards and applicable legal and regulatory
requirements. It provides direct access to KPMG's audit It is a significant investment that underlines our commit-
guidance, professional standards and documentation ment to audit quality, consistency and innovation.
templates.
Bringing it all together in KPMG Clara
Investing for the future The KPMG Clara Smart Audit Platform brings together
While our current audit workflow and methodology KPMG’s digital audit capabilities, innovative new tech-
are robust and consistent with all auditing standards’ nologies, collaboration capabilities and our new KPMG
requirements, the changes we are making will enable Clara workflow.
us to continually drive audit quality and consistency
Transparency Report 2019/20 24• Anticipate data types
Data • Guide teams in usage
Clear •
Undstandable • Methodology • Anticipate data types
Globally consistent •
Data • Guide teams in usage
Clear • KPMG
Undstandable • Methodology Clara
Globally consistent • workflow • Revised & updated
Workflow
KPMG user interface
Clara • Enable the end user
workflow • Revised & updated
Searchable •
Workflow
Knowledge user interface
Better visualisation with context • • Enable the end user
Learning • Flexible and modular to support
Searchable • Knowledge class room and micro learnings
Better visualisation with context • • On demand
Learning • Flexible and modular to support
class room and micro learnings
• On demand
Rich Content Enhanced usability Leverage Client Experience
& tech enabled Innovations
Rich Content Enhanced usability Leverage Client Experience
& tech enabled Innovations
Creating the new KPMG Clara Workflow Strategically embedding the use of data through digital
The new KPMG Clara workflow will be used by our audit audit capabilities
teams to execute and document KPMG audits. It will KPMG Clara also allows us to more seamlessly build
guide audit teams through a series of steps in a logical digital audit capabilities into our audits. Digital audit
sequence aligned to the applicable auditing standards, routines are capable of interrogating and analysing vast
with a clear display of information, visuals and guidance quantities of data.
available at the moment of need, and with embedded
advanced digital audit capabilities. The workflow and KPMG’s audit is designed to:
revised audit methodology will also be scalable – adjust-
ing the requirements to the size and complexity of the • enhance audit quality; by providing a deeper
audit engagement. This globally driven project will signif- understanding of data populations, giving focus to
icantly overhaul and redesign the execution of an audit higher risk transactions;
by KPMG professionals and clearly drive audit quality • be secure; by restricting access to data both in
and global consistency. transit and within KPMG’s IT environments; and
• be transparent; by facilitating detailed analysis to
Through the use of data mining and tracking of relevant uncover the reasons behind, and root causes of,
engagement level data indicators, the KPMG Clara outliers and anomalies and provide increased visibil-
workflow will also facilitate member firms’ monitoring of ity into higher risk transactions and process areas.
audit execution at the engagement level.
Digital audit capabilities and routines are built on princi-
Once the KPMG Clara workflow has been fully deployed ples and professional standards underlying an audit and
our predecessor audit workflow tool, eAudIT, will be do not relieve auditors of their responsibilities.
retired.
Transparency Report 2019/20 25Current capabilities in this area facilitate the perfor- lished and effectively implemented when they are more
mance of planning and risk assessment activities and stringent than the global requirements. The EIP fulfils
substantive procedures, and include capabilities that: this responsibility through:
• enable the analysis of account balances and journal • implementing/monitoring the ethics and indepen-
entry data, dence quality control process and structure within
• automate ‘period on period’ balances comparison the firm;
and ‘time series’ evolution information and • approving/appointing partners responsible for
• enable the analysis of sub-ledger, transactional data ethics and independence within the firm;
over certain business processes and accounts. • overseeing the processes related to the evaluation
of specific independence threats in connection with
Together with our KPMG Clara platform, we are signif- clients and prospective clients;
icantly investing in digital audit capabilities and paving • participating in the development and delivery of
the way for the increasing use of emerging technologies training materials;
such as robotic process automation and machine learn- • monitoring compliance with policies;
ing — which will take the power of technology applied in • implementing procedures to address non-compli-
the audit to an even greater level. ance; and
• overseeing the disciplinary process for ethics and
independence matters.
Independence, integrity, ethics and objectivity
Auditor independence is a cornerstone of international KPMG partners and employees are required to con-
professional standards and regulatory requirements. sult with the EIP on certain matters as defined in the
GQ&RMM. The EIP may also be required to consult with
We have detailed independence policies and proce- the Global Independence Group (GIG) depending upon
dures, incorporating the requirements of the IESBA the facts and circumstances.
Code of Ethics, the Danish Auditors Act and EU regula-
tion. Personal financial independence
KPMG firms and all professionals are required to be
These policies and processes cover areas such as firm free from prohibited financial interests in, and prohibit-
independence, personal independence, firm financial ed financial relationships with, KPMG firm assurance
relationships, post-employment relationships, partner and audit clients, their management, directors, and,
rotation and approval of audit and non-audit ser- where required, significant owners. All KPMG partners
vices. Automated tools facilitate compliance with these — irrespective of their firm or function — are generally
requirements. prohibited from owning securities of any audit client of
any KPMG firm.
KPMG International has detailed independence policies
and procedures, incorporating the requirements of the KPMG firms use a web-based independence compli-
IESBA Code of Ethics. These are set out in KPMG’s ance system (KICS) to assist KPMG professionals in
GQ&RMM, which applies to all KPMG firms. Automated complying with personal independence investment
tools, which are required to be used for every prospec- policies. This system contains an inventory of publicly
tive engagement to identify potential independence and available investments and provides a tracking mecha-
conflict of interest issues, facilitate compliance with nism for required users to report acquisitions and dis-
these requirements. posals of their financial interests. The system facilitates
monitoring by identifying and reporting impermissible
Our Quality & Risk Management Partner also holds the investments and other non-compliant activity (i.e., late
role as designated Ethics and Independence Partner reporting of an investment acquisition).
(EIP), who is responsible for the direction and execution
of KPMG's ethics and independence policies and pro- All partners and all manager grade and above of
cedures. The EIP is responsible for communicating and client-facing employees are required to use the KICS
implementing KPMG global policies and procedures and system prior to enter into an investment to identify
ensuring that local policies and procedures are estab- whether they are permitted to do so. They are also
Transparency Report 2019/20 26You can also read
