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Our monitoring

Our monitoring

We commit to continually improve the quality, consistency and efficiency of our audits. Our integrated quality monitoring and compliance programs enable member firms to identify quality issues, to understand the quality issues through root cause analysis and to develop, implement and report relevant remedial action plans in response to those issues.

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Quality and compliance programs

KPMG member firms are required to continually improve the quality, consistency and efficiency of their audits. Integrated quality monitoring and compliance programs enable member firms to identify quality issues, to perform root cause analysis, and develop, implement and report remedial action plans, both in respect of individual audit engagements and the member firm’s system of quality control. The integrated quality and monitoring programs include Quality Performance Reviews (QPR), Risk Compliance Programs (RCP) and Global Compliance Reviews (GCR).

Our quality monitoring and compliance programs are globally administered and consistent in their approach across member firms, including the nature and extent of testing and reporting. Member firms are required to compare the results of internal monitoring programs with the results of those of any external inspection program and take appropriate action.

Our monitoring programs evaluate both:

  • engagement performance in compliance with the applicable standards, applicable laws and regulation and KPMG International policies and procedures
  • member firm compliance with KPMG International policies and procedures and the relevance, adequacy and effective operation of key quality control policies and procedures.

The results and lessons from the programs are communicated within each member firm and the overall results and lessons are considered and appropriate action is taken at regional and KPMG International levels. The internal monitoring program also contributes to the assessment of whether the member firm’s system of quality control has been appropriately designed, effectively implemented and operates effectively.

Two KPMG International developed and administered inspection programs are conducted annually across member firms’ Audit, Tax, and Advisory functions: QPR and RCP. Additionally, all member firms are covered at least every 3 years by the cross-functional GCR program. Participation in QPR, RCP and GCR is a condition of ongoing membership of the KPMG network. Further detail on QPR, RCP and GCR is provided in this section.

Audit Quality Performance Reviews (QPR)

The QPR program assesses engagement-level performance and identifies opportunities to improve engagement quality. Each audit engagement leader is reviewed at least once in a 3-year cycle as part of QPR. A risk-based approach is used to select engagements. Member firms conduct the annual QPR program in accordance with global QPR instructions. The reviews are performed at the member firm level and are monitored regionally and globally.

Member firm Audit QPR are overseen by a senior experienced lead reviewer independent from the member firm under review.

There are robust criteria for selection of reviewers. Review teams include senior experienced lead reviewers, which are independent of the member firm under review. Training is provided to review teams and others overseeing the process, with a focus on topics of concern identified by audit oversight regulators and the need to be as rigorous as external reviewers.

Consistent criteria are used to determine engagement ratings and member firm audit practice evaluations. Audit engagements selected for review are rated as ‘satisfactory’, ‘performance improvement needed’ or ‘unsatisfactory.’

Findings from the QPR program are disseminated to member firm professionals through written communications, internal training tools, and periodic partner, manager and staff meetings.

These areas are also emphasized in subsequent monitoring programs to gauge the extent of continuous improvement.

Lead audit engagement partners are notified of less than satisfactory engagement ratings on their respective crossborder engagements. Additionally, lead audit engagement partners of parent companies/head offices are notified where a subsidiary or affiliate of their client group is audited by a member firm where significant quality issues have been identified during the audit QPR.

Global Audit Quality Monitoring Program

To further enhance the quality, rigor and consistency of the QPR program, the Global Audit Quality Monitoring Program (GAQMP) was launched in 2016. The GAQMP is comprised of a team of partners, directors and senior managers experienced in performing QPR program reviews of listed and related entity (LRE) audit engagements. The team also includes partners and professionals with experience in auditing general information technology controls and application controls.

Each of the GAQMP reviewers attends the Global QPR training delivered for their respective member firm. The GAQMP team is responsible for performing selected QP reviews of LRE audit engagements as determined by Global Quality & Risk Management.

Risk Compliance Program (RCP)

KPMG International develops and maintains quality control policies and processes that apply to all member firms. These policies and processes, and their related procedures, include the requirements of International Standard on Quality Control 1 (ISQC 1). During the annual RCP, the member firms perform a robust assessment program consisting of documentation of quality controls and procedures, related compliance testing and reporting of exceptions, action plans and conclusions. The objectives of the RCP are to:

  • monitor, document and assess the extent of compliance of the member firm’s system of quality control with Global Quality & Risk Management policies and key legal and regulatory requirements relating to the delivery of professional services
  • provide the basis for member firms to evaluate that the member firm and its personnel comply with relevant KPMG professional standards and applicable legal and regulatory requirements.

Where deficiencies are identified, the member firm is required to develop appropriate action plans.

Global Compliance Review (GCR)

Every member firm is subject to a GCR conducted by KPMG International’s global GCR team, independent of the member firm, at least once in a 3-year cycle. The GCR provides independent oversight of a member firm’s assessment of its system of quality control, including:

  • the member firm’s commitment to quality and risk management (tone at the top) and the extent to which its overall structure, governance and financing support and reinforce this commitment
  • the completeness and robustness of the member firm’s RCP, by evaluating whether there was:
    • appropriate documentation of policies, processes and related controls in place
    • adequate testing of the effectiveness of controls
    • proper conclusions in relation to issues and corrective action necessary as reported in the RCP action plan.

The GCR team performing the reviews is independent of the member firm and is objective and knowledgeable of Global Quality and Risk Management policies.

The member firm is required to develop action plans to respond to all GCR findings and agree to these with the GCR team. The member firm’s progress on action plans is monitored by a global GCR central team. Results are reported to the GQRMSG, and, where necessary, to appropriate KPMG International and regional leadership, to encourage timely remedial actions.

Root cause analysis

Member firms are required to perform root cause analysis to identify and address audit quality issues in order to prevent them from recurring and help identify good practices as part of continuous improvement.

It is the responsibility of member firms to perform root cause analysis and thereby identify and subsequently develop appropriate remediation plans for the audit quality issues identified. Heads of Audit are responsible for the development and implementation of action plans including identification of solution owners. Risk Management Partners monitor their implementation.

In 2017, KPMG International continued to strengthen our root cause analysis process and drive consistency across the network by enhancing our root cause analysis global guide and toolkit, delivering face to face training, based on the Global Root Cause Analysis 5 Step Principles, and workshops, as well as global monitoring and support.

The training and workshops target those individuals at member firm level who will be performing, or directing those performing, root cause analysis, and also provide a common platform for advancing the practices and skills associated with resourcing, planning and conducting root cause analysis.

The Global Root Cause Analysis 5 Step Principles are as follows:

  1. Problem definition
  2. Data collection and analysis
  3. Determination of root cause(s)
  4. Identify & implement remediation
  5. Monitor effectiveness

Remedial actions

KPMG International, through the Global Audit Quality Issues Council (GAQIC) and the Global Quality & Risk Management Steering Group (GQRMSG), reviews the results of the quality monitoring programs, analyzes member firm root causes and action plans and develops additional global remediation plans as required.

The GAQIC, established by the Global Audit Steering Group (GASG), considers network-wide issues arising from internal quality control reviews and external inspections, monitors progress being made in addressing audit quality issues and makes recommendations to the GASG on audit quality issues.

To date, global remediation plans developed by KPMG International have been aimed at changing culture and behavior across the KPMG network and at driving consistent engagement team performance within KPMG member firms. The remediation plans have been implemented through the development of global training, tools and guidance to drive consistency, ensure the fundamentals are right and that best practice is shared across the network.

External feedback and dialogue

Regulators

KPMG International has regular two-way communication with the International Forum of Independent Audit Regulators (IFIAR) to discuss audit quality findings and actions taken by KPMG International and member firms to address such issues. We value the open, honest and transparent dialogue that IFIAR facilitates on global audit quality issues.

Member firms are required to maintain professional and respectful relationships with the regulators including being fully responsive to issues raised, responding in a timely manner to the regulator and taking appropriate remedial actions to address deficiencies identified. Member firms evaluate and report regulatory inspections results.

Client feedback

Member firms proactively seek feedback from clients through in-person conversations and third-party surveys to monitor their satisfaction with their services. Member firms endeavor to take this feedback and make dynamic changes at both the engagement level and member firm level to meet clients’ needs.

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