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May 16, 2019

KPMG UK overhauls governance of audit business

By Joe Pickard

KPMG UK is to change its executive governance structure to introduce separate performance management and governance of the firm’s audit practice, effective 1 June 2019.

The changes will include the introduction of an audit executive committee which will assume executive responsibility for the audit business’ performance management, risk management and controls.

The audit executive committee will be led by Jon Holt, who will become the firm’s head of audit. Karim Haji will succeed Holt as head of financial services.

KPMG UK’s current head of audit Michelle Hinchliffe will join the firm’s UK board in the newly created role of chair of audit. In this role, as well as chairing the audit business, Hinchcliffe will lead the firm’s work and stakeholder engagement on the future of the audit profession.

Hinchcliffe will also become the deputy chair of the board audit oversight committee, which is responsible for the governance of the firm’s audit practice.

These changes do not mark the separation of KPMG UK’s audit practice from the rest of the firm, but KPMG UK believes they will ‘deliver on many of the recommendations proposed by the CMA and the BEIS Select Committee in their recent reports on the profession’.

Earlier this year, UK MPs called for a full legal split of the Big Fours’ audit and non-audit practices following a number of reports into the UK’s audit sector which were prompted by company collapses over the last few years such as Carillion and BHS.

KPMG UK chairman and senior partner Bill Michael said: “We’re serious about making changes to restore trust in audit. We understand concerns that the profession’s operating models have become too opaque and we are taking action to tackle these.

“The sole aim and focus of our chair of audit, our new audit executive and our audit oversight committee is to drive audit quality, via strong leadership, good governance, rigorous controls, independent decision-making and separate performance management from the rest of the firm.”

The firm’s current UK executive committee will be reshaped to form a core executive leadership team, consisting of an executive board and a clients and markets executive, supported by operations, risk and audit executive committees.

To support the structure, KPMG’s global head of management consulting Tim Jones will join the UK firm’s leadership team in the newly created role of COO and will chair the operations executive.

Scott Parker will take on the new role of head of clients and markets and will be responsible for driving growth and performance across KPMG’s non-audit business. Parker is currently head of international and market development at KPMG. KPMG UK’s managing partner Philip Davidson will retire from the UK partnership in September.

KPMG’s chief risk officer Mary O’Connor will chair the firm’s risk executive committee, which oversees the firm’s governance, risk management, legal affairs and regulatory compliance.

The firm’s north region chairman Chris Hearld will be appointed to the role of head of regions, overseeing the firm’s extensive regional presence across the UK. He succeeds Iain Moffatt, who is retiring from the partnership in the summer.

Michael said: “We are committed to establishing a more transparent operating model that effectively demonstrates the conduct and execution of our public interest responsibilities. We have already introduced new performance management rules for our auditors, within which audit quality is the primary objective and were the first to implement a ban on providing non-audit services to FTSE350 companies we audit.”

 

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