KPMG Shoves 10% of Its Audit Partners Out the Door

Posted on by Going Concern News Desk
KPMG exterior with scissors overlay

We’re sure you’ve seen this FT headline floating around today: KPMG to axe 10% of US audit partners. And if you, like most denizens of the internet these days, read only the title, you might get big cartoon eyes and think “Oh, shit must be BAD if they’re axing partners!”

To be clear, shit is in fact bad. But there’s a lot of pertinent information underneath that headline that paints a different picture. Like this, for example:

KPMG is cutting about 10 per cent of its US audit partners, after years of failed attempts to urge more of them to retire early to improve productivity at the accounting firm.

The firm revealed the cull in a meeting on Wednesday where attendees were told that the action was needed because the size of the partnership was bloated relative to business, according to people familiar with the matter.

Bloomberg Tax wrote this in their story:

KPMG will slash the number of partners running its US assurance business in a bid to boost the unit’s productivity and better align its staffing with market demands.

The reductions come after KPMG LLP had offered early retirement packages to entice partners to leave the practice over the past few years, the Big Four accounting and consulting firm said.

OK so the partnership is fat, profits are small, and these boomers (in spirit if not entirely in age) wouldn’t go quietly into that good night. It’s never a good sign for the proletariat when the partners start dropping like flies but we don’t think this is worth panicking about either.

Pour one out for the departing partners and cross your fingers that one is angry enough about it to get in touch with us to talk about what happened.

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Silvercorp Metals CEO Reminds Everyone That They’re a ‘Real Company’

As we’ve discussed, Silvercorp Metals hasn’t appreciated the anonymous letters floating around the Series of Tubes accusing the Canadian miner of accounting fraud and has stated that, save their assets in China, “this wouldn’t be happening.” What the company would really like is for these jerks to show themselves and cooperate with investigators. But until that happens, Silvercorp hired KPMG to poke around to calm all the fears out there. According to reports, the House of Klynveld will have a report out soon but in the meantime, Silvercorp CEO Feng Rui will address everyone who thinks that his company is just a bunch of Tonka trucks in a sandbox:

“We’re a real company and will fight against shorters and distorters,” Feng Rui, Silvercorp chief executive officer, said today at a meeting in Beijing.

Furthermore, the auditors in this matter, Ernst & Young, have carried out their duties to a T and if you think some bullshit letters are going to cause them (or Feng & Co.) to do things differently, you’d be wrong:

“Our auditing doesn’t have anything wrong, the allegations are fabrication,” Feng said today in an interview on the sidelines of the meeting.[…] “The allegations won’t prompt us to make any changes in the process of financial reporting and auditing,” he said

Frankly, it’s embarrassing that they even have to address this but you’ve given them no choice.

Silvercorp Says KPMG to Issue Fraud Allegation Report ‘Soon’ [Bloomberg]

(UPDATE) Comp Watch ’11: Things Are Looking Up for KPMG Advisory

~ UPDATE: Email sent to audit professionals added to the end of the post.

How do variable increases “larger than last year for most of you and much larger for many” sound?

With the first half of FY2011 in the books, we want to provide you with an update on the firm’s and Advisory’s performance and share information about our plans for employee compensation.

We are pleased to report that the firm and Advisory are ahead of plan for the first half of the year. Advisory’s revenues have grown 18% compared to last year and our pipeline of opportunities stands at a record $1.5 billion, confirming the marketplace relevance of our services.

We have also successfully added more professionals to our team (over 800 new and ennovated high value services (including services around cloud and data analytics), acquired a strategic sourcing business (placing us No. 1 in that important piece of the market) and strengthened our training programs (through Advisory University and many targeted programs).This is great news, and a direct result of your contributions!

Further, we are confident that we can finish the year in a very strong position if we continue to work together with a sharp focus on the marketplace, our people, the profitability of our engagements (including expanding the work we offshore to KPMG Global Services), and the timely billing and collection of our receivables.

So what does this mean for compensation? As we have said in the past, our philosophy is that as the business does well, we will share those rewards with our people. And, assuming we stay on plan the remainder of the year, that’s exactly what we plan to do:

Variable Compensation and Salary Increases

Based on our strong results to date, variable compensation will be larger than last year for most of you and much larger for many. Further, we expect that approximately 80% of you will receive a variable compensation award in October. And if you are a client service associate or senior associate, variable compensation is in addition to any awards earned as part of the Above & Beyond program.

Market conditions are dynamic and will vary greatly across our many service disciplines within Advisory. Therefore the range of salary increases will also vary greatly by individual and skill set. We have increased the planned spend for salary increases as well, so increases in base salaries on average will also be better than last year. We know that rewarding and recognizing our people is critical to fostering a high-performance culture, so you can be sure that we will continue to meet our commitment to provide an attractive and competitive total compensation package that differentiates exceptional performers with superior rewards.

Accelerated Compensation Communication

To help provide you with more clarity on what you can expect in the way of compensation come October 1, in July, a leader will meet with you individually to provide you with a line of sight into what you can personally expect to receive regarding salary increase and variable compensation. (As in past years, employees promoted as of July 1, will receive a promotion bonus at that time that will be in addition to any salary increase or variable compensation effective October 1).

And we ask that each of you continue working as a team, providing the best service you can to your clients and colleagues, and helping us to drive outstanding business results. Remember, the better the business does, the better we all do.

Thanks for everything you’re doing to build KPMG’s reputation as the best firm to work with, and to contribute to our success!

Reactions are welcome at this time.

UDPATE: Henry Keizer lays it down for the audit side of the house and while rosy (nearly identical wording as noted in the comments), there’s no specific “larger” or “much larger” language which may be of concern:

With the first half of FY2011 in the books, I want to provide you with an update on the firm’s performance and share information about our plans for employee compensation.

I am pleased to report that the firm is ahead of plan for the year. This is great news, and a direct result of your contributions. And, while there is still a lot more work to do, we are confident that, working together, we can finish the year in a strong position. We have good traction in the marketplace and anticipate that the demand for our services and skills will continue to be strong.

So what does this mean for compensation? As we have said in the past, our philosophy is that as the business does well, we will share those rewards with our people. And, assuming we stay on plan the remainder of the year, this year’s compensation pool will be enhanced compared to last year.

We know that rewarding and recognizing our people is critical to fostering a high-performance culture, so you can be sure that we will continue to meet our commitment to provide an attractive and competitive total compensation package that differentiates exceptional performers with superior rewards.

And we ask that each of you continue working as a team, providing the best service you can to your clients and colleagues, and helping us to drive outstanding business results. Remember, the better the business does, the better we all do.

Thanks for everything you’re doing to build KPMG’s reputation as the best firm to work with, and to contribute to our success.

Tax people – anything to report?

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