Layoff Watch ’25: KPMG Lets Go of 195 People in Audit

Posted on by Going Concern News Desk
KPMG exterior building with logo

Bloomberg reported yesterday that KPMG has once again let a batch of people go, this time about 195 in audit which works out to 2% of the total audit army.

“We are changing what we do and how we work,” the firm said in a statement to Bberg. “Our multi-year audit transformation is driving changes in how we conduct our audit and assurance services. We are also balancing the need for new skills to meet changing market demands against persistently low attrition.”

Reddit is being really supportive to the recently-axed:

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PwC Had Enough with Old Republic’s Sketchy Accounting

Accounting firms take a lot of grief for bending over backwards for their clients. They’re in the client service business after all and keeping them as happy as possible is priority numero uno (despite what you might hear). Considering this factoid, when an accounting firm decides to cut a client loose for a “disagreement” over an accounting practice, we feel that’s a pretty good reason for any future accounting firm to think long and hard before taking on said client (case in point: KPMG taking the Overstock.com audit).


PricewaterhouseCoopers notified Old Republic International Corp. on March 19th that they would be “declining to stand for re-election as Old Republic’s independent registered public accounting firm for 2010.” That’s nice SEC filing language for “We’re so grossed out by you that we refuse to audit you any more.”

The two firms disagreed about the accounting treatment of “certain mortgage guaranty reinsurance commutation transactions with captive reinsurers owned by lending institutions.” That description alone makes us nauseous. The gist from Old Republic’s 8-K filing:

Old Republic had concluded that, in accordance with traditional reinsurance accounting practices, funds received ($82.5 million) in excess of amounts owed to it by the captive reinsurers should be deferred and recognized in the income statements of the future periods during which the related claim costs were expected to occur. PwC believed that generally accepted accounting principles (“GAAP”) required that the $82.5 million be recognized immediately as income from a contract termination.

So you have “traditional accounting practices” versus almighty GAAP. The tradish accounting wasn’t good enough for PwC, so they brought the probelme to the attention of the audit committee. The AC ultimately decided…wait…that management was correct. Shocked? Us too. The disagreement was brought to light back in November and in a press release when the company said that the transactions in question “which resulted in little consequential effect on the pretax loss.”

Apparently PwC wouldn’t let it go and the Company called in the SEC to get their $0.02 on the matter. Lo and behold, the Commission sided with PwC. After a lot profanity-laced belly aching (that’s what we imagine, anyway) and sleepless nights for both OR’s accounting department and the PwC audit team (that’s not debatable), Old Republic filed the delayed 10-Q last month with restated financial statements.

After what was surely 5 or so months of pure hell, PwC figured that this was an awkward enough situation that a break up was warranted. This was probably the perfect opportunity for PwC to get out of this engagement. They figured Old Republic wasn’t going to change their less-than GAAP-y ways, the audit committee is obviously no help, and God knows you don’t want to get the SEC involved every single time there’s a disagreement. If you were to ask us, its seems like a pretty logical reaction.

Now the only question is, which audit firm picks up Old Republic? PwC will certainly have some interesting things to share with the firm that decides they’re up for this particular headache.

PricewaterhouseCoopers drops Old Republic [Chicago Breaking News/CT]
8-K [SEC.gov]

Are Going Concern Opinions the Kiss of Death?

Thumbnail image for Thumbnail image for epic-failure.thumbnail.jpgOne thing is for sure: clients don’t like getting them. Auditors may even go out of their way to not give one in order to maintain “excellent client service” or whatever the latest buzz phrase is.
Many companies risking the dreaded explanatory paragraph arrived there on their own accord but if a company is legitimately trying to recover from their stay in financial intensive care, auditors may be piling on by issuing the GCO.


CFO:

Such a qualification can result in tougher-to-get and more expensive financing deals, just when the company is most in need of a break. Indeed, once hit with a going-concern qualification, companies may succumb to a “self-fulfilling prophecy,” say accounting observers. The pariah status such an opinion confers all but forces investors, suppliers, and lenders to turn away, often driving a company on the brink of bankruptcy into a Chapter 11 filing.

CFO’s piece cites the opinion of Al King, former Chairman of the Institute of Management Accountants, who mentions the guidance of auditing rules “don’t allow auditors a wider range of possible warnings.” The situation comes down to one of options: 1) we’re cool or 2) we’re doomed.
That may be a valid point but the idea of an explanatory paragraph that discusses the alignment of the planets along with management’s brilliant plan to save the sinking ship doesn’t seem like the answer.
Nevermind breaking the bad news to your client, who may be living in denial over the state of their company. Or as the Overland Storage situation demonstrated, clients just get their panties in a bunch and start firing auditors. But you still have to the your jobs, amiright?
The GC opinion. Discuss any experiences you have had in comments. Did it involve grown men sobbing like children? Delusional clients? Maybe just gnashing of teeth? Or did the partner fold like a cheap lawn chair in the name of client service?
Living with a Scarlet Audit Letter [CFO]

6 thoughts on “Layoff Watch ’25: KPMG Lets Go of 195 People in Audit”

  1. So much for having difficulties in finding enough US qualified graduates. Is it too late to go back to the 150 hour requirement?

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  2. I’d have to imagine 195 people is also roughly similar to the amount of people that decide to give notice after busy season. Is 2% ever really considered significant with respect to public accounting workforce?

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  3. Surprised the usual anonymous poster hasn’t said one of the following:

    “good, they trimmed the fat”

    “good, they over hired during covid”

    “good, these lazy millennials and gen z’ers earned it”

    It’s a rough job market, and I feel for those affected, they will definitely have it harder landing their next role because of this…wild they worked at one of the top firms in the country/world and still will have to convince people in interviews they are not discarded trash.

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  4. It’s not just accounts. The firm has also riffed admins, the ASK group, a type of admin service, and 140 partner “retired” the last week of September

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