KPMG legal structure and governance | KPMG | GLOBAL

KPMG legal structure and governance

KPMG legal structure and governance

KPMG International Cooperative (KPMG International) is a Swiss cooperative, which is a legal entity formed under Swiss law. It is the entity with which all the member firms of the KPMG network are affiliated.

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KPMG International

KPMG International Cooperative (KPMG International) is a Swiss cooperative, which is a legal entity formed under Swiss law. It is the entity with which all the member firms of the KPMG network are affiliated.

KPMG International carries on business activities for the overall benefit of the KPMG network of member firms but does not provide professional services to clients. Professional services to clients are exclusively provided by member firms.

One of the main purposes of KPMG International is to facilitate the provision by member firms of high-quality Audit, Tax and Advisory services to their clients. For example, KPMG International establishes and facilitates the implementation and maintenance of uniform policies, standards of work and conduct by member firms, and protects and enhances the use of the KPMG name and brand.

KPMG International is an entity that is legally separate from each member firm. KPMG International and the member firms are not a global partnership, joint venture, or in a principal or agent relationship or partnership with each other. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.

Legal structure of the KPMG network

KPMG is a global network of professional services firms providing Audit, Tax and Advisory services to a wide variety of public and private sector organizations.

KPMG’s structure is designed to support consistency of service quality and adherence to agreed values wherever the member firms operate.

Unless otherwise stated, the words ‘member firm’ or ‘KPMG member firm’ when used in this Transparency Report include the following:

  • Those entities that are members of KPMG International as a matter of Swiss law because KPMG International is a Swiss cooperative (i.e. similar to shareholders, albeit KPMG International has no share capital and, therefore, only has members not shareholders).
  • Those entities (‘sublicensees’) that are not members of KPMG International as a matter of Swiss law but have still entered into legal agreements with KPMG International and also an entity that is a ‘member’. Such agreements mean that sublicensees are member firms of the KPMG network. Generally, the rights and obligations of a sublicensee as a KPMG member firm are exactly the same as if it had been a member. In particular, all rights and obligations of member firms that are described in this document are rights and obligations of sublicensees unless otherwise specifically stated. In addition, the member that is party to the sublicensee’s agreement with KPMG International is also responsible to KPMG International (but not to any other person or entity) for the sublicensee’s compliance with its obligations as a KPMG member firm.
  • Those entities that are owned, managed and controlled by an entity that is a member or a sublicensee. The respective member or sublicensee is responsible to KPMG International for such controlled entity’s compliance with obligations to KPMG International as if it were a member or sublicensee.

Legal relationship between KPMG International and each member firm

KPMG is the registered trademark of KPMG International and is the name by which the member firms are commonly known. The rights of member firms to use the KPMG name and marks are contained within agreements with KPMG International.

Member firms are generally locally owned and managed. Each member firm is responsible for its own obligations and liabilities. KPMG International and other member firms are not responsible for a member firm’s obligations or liabilities.

Member firms may consist of more than one separate legal entity. If this is the case, each separate legal entity will be responsible only for its own obligations and liabilities, unless it has expressly agreed otherwise.

Responsibilities and obligations of member firms

Under agreements with KPMG International, member firms are required to comply with KPMG International’s policies and regulations including quality standards governing how they operate and how they provide services to clients to compete 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 multinational clients, manage risk and deploy global methodologies and tools.

Each member firm takes responsibility for its management and the quality of its work. Member firms commit to a common set of KPMG values (refer to Building trust).

KPMG International’s activities are funded by amounts paid by member firms. The basis for calculating such amounts is approved by the Global Board and consistently applied to the member firms. A firm’s status as a KPMG member firm and its participation in the KPMG network 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.

KPMG International governance bodies

Global Council

The Global Council focuses on high-level governance tasks and provides a forum for open discussion and communication among member firms.

It performs functions equivalent to a shareholders’ meeting (albeit KPMG International has no share capital and, therefore, only has members, not shareholders).

Among other things, the Global Council elects the Global Chairman and also approves the appointment of Global Board members. It includes representation from 58 member firms that are ‘members’ of KPMG International as a matter of Swiss law. Sublicensees are generally indirectly represented by a member.

Global Board

The Global Board is the principal governance and oversight body of KPMG International. The key responsibilities of the Global Board include approving strategy, protecting and enhancing the KPMG brand, overseeing management of KPMG International and approving policies and regulations. It also admits member firms.

The Global Board includes the Global Chairman, the Chairman of each of the three regions (the Americas; Asia Pacific (ASPAC); and Europe, the Middle East and Africa (EMA)) and a number of senior partners of member firms.

It is led by the Global Chairman, who is supported by the Executive Committee, consisting of the Global Chairman, the Chairman of each of the regions and currently four other senior partners of member firms. The list of Global Board members, as at 1 October 2017, is available in the KPMG International Annual Review.

One of the other Global Board members is elected as the lead director by those Global Board members who are not also members of the Executive Committee of the Global Board (‘non-executive’ members). A key role of the lead director is to act as liaison between the Global Chairman and the ‘non-executive’ Global Board members.

KPMG International committees

The Global Board is supported in its oversight and governance responsibilities by several other committees. The lead director nominates the chairs and members of certain Global Board committees for approval by the Global Board. The roles of a number of these committees are summarized below.

Executive Committee

The Executive Committee’s role includes recommending global strategy and priorities to the Global Board for its approval, including in relation to:

  • KPMG’s vision and purpose
  • the KPMG brand
  • strategy and strategic alignment
  • coordinated go-to-market and service-deliveryprograms.

It also supports and holds accountable the Global Management Team in driving and promoting the execution of the global strategy and priorities.

Governance Committee

The Governance Committee’s role is:

  • assessing, and making recommendations to improve, the governance and management structure of KPMG International
  • recommending policies and regulations in respect of member firm governance to the Global Board for approval
  • developing and implementing biennial Global Board evaluation process
  • overseeing succession planning, recommending Global Board nominees and the process for the appointment of a Global Chairman
  • approving the remuneration of the Global Chairman and members of the Global Management Team, and overseeing their annual performance reviews.

Investment Committee

The Investment Committee’s role is:

  • overseeing strategic investments
  • promoting and overseeing the coordination of external alliances that are anticipated to have an impact in more than one country.

Operations Committee

The Operations Committee’s role is:

  • overseeing KPMG International’s financial reporting, budget and business planning process
  • recommending and overseeing operational investments
  • promoting the implementation of the high growth markets strategy.

Quality & Risk Management Committee

The Quality & Risk Management Committee’s role is:

  • reviewing and evaluating KPMG International’s quality, risk and compliance policies, processes and activities
  • promoting a culture that is committed to the highest standard of ethics and compliance.

Professional Indemnity Insurance (PII) Committee

The Professional Indemnity Insurance Committee recommends the professional indemnity insurance program, in which member firms are obliged to participate, to the Global Board for approval.

Global Management Team

The Global Board has delegated certain responsibilities to the Global Management Team. These responsibilities include developing global strategy by working together with the Executive Committee. The Global Management Team also supports the member firms in their execution of the global strategy and is responsible for holding them accountable for commitments.

It is led by the Global Chairman and includes the Global Chief Operating Officer, the Global Chief Administrative Officer, global function and infrastructure heads, and the General Counsel.

The list of Global Management Team members is available in the KPMG International Annual Review.

Global Steering Groups

The Global Steering Groups work closely with regional and member firm leadership to:

  • establish and communicate appropriate audit and quality/risk management policies
  • enable effective and efficient risk processes to promote audit quality
  • proactively identify and mitigate critical risks to the network.

The Global Steering Groups act under the oversight of the Global Management Team.

Global Audit Steering Group (GASG)

The GASG is responsible for driving the member firms’ implementation of KPMG’s audit strategy, including standards of audit quality. The GASG works closely with the GQRMSG in relation to quality and risk matters related to audit.

The GASG is chaired by the Global Head of Audit, and includes the Heads of Audit from the 10 larger member firms, the Regional Heads of Audit, the Chief Operating Officer for Global Audit and the Global Audit Quality & Risk Management Partner.

Global Audit Quality Issues Council (GAQIC)

The GAQIC is chaired by the Global Audit Quality & Risk Management Partner and includes the Chief Operating Officer for Global Audit Quality & Risk Management; the Heads of Audit or their designees from the 10 larger member firms; the Global Head of Audit Methodology; the Global International Standards on Auditing Leader; the Global International Financial Reporting Standards (IFRS) Leader; and the Partner-in-Charge, Global Independence Group.

The GAQIC is responsible for considering audit quality matters on a network-wide basis (including issues arising through quality performance and regulatory reviews as well as root cause analysis) with a specific focus on those issues arising from the 10 larger member firms. The GAQIC shares results of actions implemented locally to improve audit quality, with focus on best practices that reduce audit quality findings and makes recommendations to the GASG on policy changes related to audit quality issues.

Global Quality & Risk Management Steering Group (GQRMSG)

The GQRMSG is chaired by the Global Head of Quality, Risk and Regulatory and includes the Deputy Head of Global Quality & Risk Management; the Chief Operating Officer for Global Quality & Risk Management; the Global Heads of Audit, Tax and Advisory; the Global Quality & Risk Management Partners for Audit, Tax, and Advisory; the Partner-in-Charge of the Global Independence Group; the Global Head of People Performance and Culture; the General Counsel; and the Risk Management Partners for each of the three regions and for the larger member firms.

The GQRMSG is responsible for setting quality and risk management policies and procedures for the network and for providing associated guidance. These are documented in the Global Quality & Risk Management Manual (GQ&RM Manual) available to all member firms and their personnel on a web-based platform. The GQRMSG is responsible — through Quality Performance Review (QPR), Risk Compliance Program (RCP), Global Compliance reviews (GCR) and Area Quality and Risk Management Leaders (ARLs) — for monitoring:

  • member firm compliance with global quality and risk management policies and processes and system
  • proactive identification and mitigation of significant professional services risks faced by member firms
  • performance of member firm professional services to drive and help ensure consistent high-quality work globally.

Area Quality & Risk Management Leaders

The Global Head of Quality, Risk and Regulatory appoints Area Quality & Risk Management Leaders who:

  • assess the effectiveness of a member firm’s quality and risk management efforts to identify and mitigate significant risks to the member firm and the KPMG network and actively monitor alignment with global quality and risk management strategies and priorities
  • share leading best practices in quality and risk management
  • report to Global Head of Quality, Risk and Regulatory.

Total turnover achieved by EU/EEA audit firms resulting from the statutory audit of annual and consolidated financial statements (2)

Aggregated revenues generated by KPMG audit firms from EU and EEA Member States resulting from the statutory audit of annual and consolidated financial statements was EUR2.7 billion during the fiscal year ending 30 September 2017. The EU/EEA aggregated statutory audit revenue figures are presented to the best extent calculable and translated at the average exchange rate prevailing in the 12 months ended 30 September 2017.

2The financial information set forth represents combined information of the separate KPMG member firms that perform professional services for clients. The information is combined here solely for presentation purposes. KPMG International performs no services for clients nor, concomitantly, generates any client revenue.

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