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November 22, 2022

KPMG Is Looking for Volunteers to Receive More Thorough Audits

Yes, you read that correctly. After all, in changing the value of audits, KPMG doesn't want to force anyone to do it because that just wouldn't be cool.

In a piece written for economia, Tony Cates, UK head of audit at KPMG writes:

Earlier this year we field tested an innovative form of report that went further than FRC requirements, reporting not just what we identified as the risks and our audit work on them, but also our findings – most famously on Rolls-Royce.

The reception of those reports has been fantastic. In the online voting on our Restoring Trust web pages, 80% backed the approach. The feedback that I have received from investors has been extremely positive and encouraging. For me, that is really important.

Well yes, it would be the definition of sucky if you went to all that trouble and investors were like "WTF is this garbage? Bring back the old audit reports, you clowns."

We knew that we were trying something bold, but this reception really has bowled us over. So I don’t see it now so much as where do we go next – the direction seems clear – but when do we go there?

So we asked ourselves a simple question: why not right now?

We saw no reason at all. So with our recently announced approach that’s exactly what we are doing at KPMG. We will include our findings in our long-form audit reports where the company engages us to do so. It is, so to speak, an appeal for volunteers, because for something that goes beyond requirements we don’t feel that it would be appropriate to impose it on companies. By making our appeal publicly we hope to put transparency around that process. For example, we’ve flagged that we’re inviting companies to decide before the audit commences. It would hardly be in anyone’s interests if investors thought that self-serving choices were being made based on sight of the particular findings.

Paint us skeptical but we can't see companies lining up for audits that cover more than the bare minimum. When I take my car in for an oil change, I don't opt for a 150-point inspection. I already know I need new windshield wiper blades and a tire rotation, thanks.

Is this the future of audit? KPMG certainly hopes so.

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