April 2014 saw the European Parliament approve the legislation to reform the audit market including spreading the new UK ‘long-form’ audit reporting across Europe.
On the very same day, UK head of audit Tony Cates, was in the US talking candidly about the value of an audit and his enthusiasm for that new UK audit reporting.
Tony was speaking at a public meeting of the US Public Company Accounting Oversight Board (PCAOB) in Washington about the UK firm’s experience in issuing the new ‘long-form’ audit reports.
Reminding the audience about the decline in shareholders’ trust in companies and the value of the audit, which had been thrown into the spotlight by the financial crisis, he stressed KPMG’s commitment as a responsible business to reform, innovation and to shareholders as the client of the audit report.
“Audit should have been playing a key role in creating trust, but it became apparent that the audit wasn’t delivering all it could,” he told the audience. “So we thought it absolutely right to make the move to a long-form report – to deliver more of the value to shareholders.”
Whilst the new reports say what we thought the issues were and what we did about them, Tony also explained that we’ve put our thought-leadership commitment to the test by issuing a very small number of reports that go further and say what we found – giving graduated findings in the key audit areas – for example, our report on Rolls-Royce Holdings plc. Others at the public meeting, including investors and our own audit regulator, had already seen that report and were very positive, with one describing it as “pioneering”
Tony explains more about this bold idea in KPMG’s Audit reports – field testing a bold idea. This live field test, he explains, is intended to start and lead the debate about the future of audit, and Tony urges anyone who is interested to join this debate.
Speaking to Newsroom after the public meeting, Tony said: “I am already seeing evidence that KPMG is gaining a reputation among investors for providing the most useful audit reports and for being the thought leaders, keen to engage with investors. Consistent with the positive feedback we have had from investors, a Citi Equity Research survey of 88 reports concludes that, “KPMG’s contain the most useful analysis of risks”, whereas “PwC’s reports have fallen short of best practice”.
“But we should not take such praise for granted. So I want us to continue to drive up the quality of our audit work and to keep our audit reports clearly ‘best in class’. It’s a great opportunity for our firm to continue to pursue the strategy of being the number one audit firm in the UK.”
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