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KPMG

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KPMG
Company typeSwiss Cooperative
IndustryProfessional services
Founded1987; individual components from 1870
HeadquartersAmsterdam, Netherlands
Key people
Jeremy Rosenberg, Brand
ProductsAudit
Tax
Advisory
RevenueIncrease$16.9 billion USD (2006)
Number of employees
113,000
Websitewww.kpmg.com

KPMG is one of the largest professional services firms in the world. KPMG employs 113,000 people in a global network spanning 148 countries. Composite revenues of KPMG member firms in 2006 were $16.9 billion USD (7.6% growth from 2005). KPMG has three lines of services: audit services, tax services, and advisory services. KPMG is a Big Four auditor, alongside PricewaterhouseCoopers, Ernst & Young and Deloitte Touche Tohmatsu.

Name

The name of the firm, KPMG, is not actually an initialism. However, the roots of the name stem from four partners in the firms that merged to form KPMG.

History

File:PeatMarwick.gif
The Peat Marwick logo.
File:KPMG old.gif
The KPMG logo used by member firms in the 1990s.
  • In 1870, William Barclay Peat formed an accounting firm in London
  • In 1877 accountancy firm Thomson McLintock opens in Glasgow
  • In 1911, William Barclay Peat & Co. and Marwick Mitchell & Co. merged to form what would later be known as Peat Marwick International (PMI).
  • In 1979, Thomson McLintock forms KMG (Klynveld Main Goerdeler) a grouping of independent national practices to create a strong European-based international firm.
  • In 1987 Thomson McLintock/KMG and Peat Marwick joined forces in the first mega-merger of large accounting firms and formed KPMG.
  • In 1997, KPMG and Ernst & Young announced that they were to merge, in a manoeuvre largely seen as a spoiling tactic over the merger of Price Waterhouse and Coopers & Lybrand. However that merger, to form PricewaterhouseCoopers, was granted regulatory approval while the KPMG/Ernst & Young tie-up was later abandoned.
  • In 2001, KPMG divested its U.S. consulting firm through an IPO of KPMG Consulting Inc, which is now called BearingPoint, Inc.. A song that was produced for KPMG, "Our Vision of Global Strategy", experienced a brief period of Internet notoriety.
  • In 2002, the UK and Dutch consulting arms were sold to Atos Origin.
  • In 2003, KPMG divested itself of its legal arm, Klegal.
  • In 2005, the U.S. member firm admitted criminal wrongdoing in a multi-billion dollar tax shelter fraud.
  • In 2006, KPMG’s member firms in the UK and Germany proposed to merge and form a single entity, KPMG Europe LLP. With a projected turnover for the UK and German firms in excess of £2 billion in 2009, KPMG Europe LLP will most likely be the largest fully integrated accountancy firm in Europe.
  • In October 2007, KPMG's member firms in the UK, Germany and Swizerland merged to form KPMG Europe LLP. They now have joint Chairmen, John Griffith-Jones and Ralf Nonnenmacher.

Each national KPMG firm is an independent legal entity and is a member of KPMG International, a Swiss cooperative registered in the Swiss Canton of Zug. KPMG International changed its legal structure from a Swiss Verein to a cooperative under Swiss law in 2003.[1]

KPMG International is led by:

  • Sir Michael Rake, Chairman, Senior Partner of KPMG in the United Kingdom. Timothy P. Flynn, Chairman and CEO of KPMG LLP, should become the next chairman as for October, 1st of 2007, since Michael Rake will manage BT Group plc as chairman ;
  • Carlson Tong and John B. Harrison, Chairman-Asia Pacific Region, Partner of KPMG in China and Hong Kong;
  • Timothy P. Flynn, Chairman-Americas Region, Chairman of KPMG in the United States;
  • Ben van der Veer, Chairman-Europe, Middle East and Africa Region, Chairman of KPMG in the Netherlands.

Audit clients

KPMG member firms serve as the independent auditors for a large number of major corporations:

Tax shelter fraud

Main article: KPMG tax shelter fraud

In early 2005, the United States member firm, KPMG LLP, was accused by the United States Department of Justice of fraud in marketing abusive tax shelters. KPMG LLP admitted criminal wrongdoing in creating fraudulent tax shelters to help wealthy clients avoid $2.5 billion in taxes and agreed to pay $456 million in penalties in exchange for a deferred prosecution agreement. KPMG LLP would not face criminal prosecution if it complied with the terms of its agreement with the government. On January 3, 2007, the criminal conspiracy charges against KPMG were dropped.[2] However, Federal Attorney Michael J. Garcia stated that the charges could be reinstated if KPMG does not continue to submit to continued monitorship through September 2008.[3]

Before the settlement, the firm, on the advice of its counsel Skadden, Arps, Slate, Meagher & Flom LLP, removed several tax partners and admitted "unlawful conduct" by those partners. The firm agreed to cooperate with DOJ's investigation and help prosecute former partners who had devised and sold the tax shelters. Additionally, the firm hired former U.S. district judge Sven Erik Holmes to monitor its legal and regulatory affairs.

Banco Nacional Scandal in Brazil

In 1995 it was unveiled that the financial statements of Banco Nacional S.A., a banking corporation which was audited for more than fifteen years by KPMG Brazil, had been under fradulent manipulation for more than eight years. Although those financial statements pointed a net equity of some US$ 800 million in december of 1994, this being without any remark from KPMG, Banco Nacional S.A. was in a very different financial situation with accrued losses of about US$ 6 billion.

In a criminal lawsuit not ended as of April 2007, KPMG Brazil's partner Marco Aurélio Diniz Maciel was twice convicted for his role on the supervision of the audit of Banco Nacional S.A..[4]

There are some lawsuits against KPMG filed by individual shareholders as well as a Class Action filed by Federal Attorneys at the Federal Capital District Court in order to seek reparation for shareholders.

The Banco Nacional scandal prompted a large debate about the role of independent auditing in Brazil and may still have repercussions on KPMG activities worldwide, mainly derived from the interdependence associated with the auditing of the many regional branches of multinational corporations

Corporate Anthem and Internet Cliche

The firm has also achieved widespread notoriety for its corporate anthem, entitled "Our Vision of Global Strategy". The song has enjoyed cult status online and at many business schools, such as the Richard Ivey School of Business. Although the anthem was officially released by KPMG as a motivational tool, upper management has since disowned the song (though it remains popular with many employees such as Jeremy Rosenberg).

Notable current and former employees

Business

Politics and public service

Other

See also

Citations

  1. ^ Handelsregister des Kantons Zug (Registration Number CH-020.6.900.276-5), http://hrazg.ch/
  2. ^ Charge Against KPMG Dropped Carrie Johnson, January 4, 2007, Washington Post
  3. ^ Prosecutors end tax-shelter case against KPMG, dropping charge after settlement January 3, 2007, International Herald Tribune
  4. ^ [1]
  5. ^ 'Tis the season to project stats Jonah Keri, February 14, 2007, ESPN
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