KPMG is celebrating its strongest UK revenue growth in a decade, having raked in billions despite the damage to its reputation after the collapse of its client Carillion.
Only months after KPMG was accused by MPs of being part of a “cosy club” and “complicit” in the run-up to the shock demise of the government contractor, the accountancy firm reported an 8% rise in revenue to £2.3bn in the 12 months to 30 September. Profit surged 18% to £365m.
Bumper profits helped to boost the pay packets of KPMG’s senior executives, with the average payout per partner rising to £601,000 from £519,000 in 2017.
KPMG was one of the firms singled out in a damning report on the demise of the construction firm and government contractor Carillion, which collapsed under a mountain of debt in January.
“In its failure to question Carillion’s financial judgments and information, KMPG was complicit in the company’s questionable accounting practices, complacently signing off its directors’ increasingly fantastical figures over its 19-year tenure as Carillion’s auditor,” MPs on the work and pensions and business select committees concluded in May.
KPMG was fined £3m in August by the Financial Reporting Council (FRC) after the firm admitted to misconduct in its audits of the fashion chain Ted Baker in 2013 and 2014. It followed a £4.5m fine by the FRC in June, for its audit of Quindell in 2013.
The strong results come at a difficult time for the big four firms – KPMG, EY, Deloitte and PwC – which having attracted criticism from politicians and regulators over the quality of their audit work and face calls to be broken up.
They were all criticised for failing to spot problems at Carillion sooner and for prioritising profits over proper scrutiny of companies put under the microscope during their audits.
MPs accused the firms of “feasting” on the carcass of Carillion after banking £72m for work linked to the construction firm’s eventual collapse.
Professional firms such as KPMG have also been criticised for conflicts of interest, given the wide array of work done for big clients such as Carillion. It has been claimed that firms are less willing to challenge auditing clients in the hope of winning lucrative contracts for consultancy and advisory work.
However, KPMG stressed in its latest results that it was the first UK firm to “voluntarily stop providing ‘non-audit’ services to the FTSE 350 companies it audits”. It has also recommended that the ban is rolled out across all audit firms in the UK.
KPMG UK’s chairman and senior partner, Bill Michael, said: “I have been clear that our wider profession faces challenges. In order to safeguard against any perceptions of conflict of interest, we have drawn a clear line between our advisory and audit work for UK-listed businesses.”
KPMG’s results also detailed its median gender pay gap, which stood at 28%, while the average gap came out at 42%. The median ethnicity pay gap was 14%, and stood at 26% on average.
Those figures include employee and partner pay.
