KPMG International Limited

Company information

• Date founded: 1987
• Industry: Professional services
• Corporate headquarters: Amstelveen, Netherlands
• Type: Private

Overview

KPMG International Limited is a coordinating entity for an international network of member firms known collectively as KPMG. The member firms are all independent, separate legal entities that offer audit, tax, and advisory services. KPMG International Limited is headquartered in Amstelveen, Netherlands, with KPMG member firms located around the world. KPMG retains this distinct structure in part because many governments require audit and legal firms to be locally owned and independent. Therefore, the KPMG member firms are not a united, multinational corporation but individual entities. KPMG International is a private company limited by guarantee in the United Kingdom.

Member firms in the KPMG organization all have legal connections to KPMG International, though not all member firms have the same legal relationships. The member firms are the part of KPMG that offer professional services, while KPMG International itself does not offer business clients any services. Instead, KPMG International acts as a coordinating entity to maintain consistency and generate the policies and procedures the member firms follow. KPMG member firms are independent and must act within the laws and regulations of the areas in which they function. They are also expected to comply with policies and procedures established by KPMG International. KPMG member firms cannot bind KPMG in legal agreements, and KPMG cannot bind its member firms in them. KPMG can remove individual firms from the group if these firms do not follow KPMG’s regulations and policies.

The most important role of KPMG International is to set quality standards and regulations for its member firms to follow. This allows the KPMG brand to maintain consistency despite the member firms not being part of a single entity. KPMG International is made up of a global network made up of a council, board, management team, and steering groups. The council has representatives from more than fifty KPMG member firms. This group provides high-level governance and facilitates communication among the member firms. The board sets most of the rules and policies that the member firms are expected to follow. This body also approves new member firms and has the power to remove members from the group. The board is headed by a global chair (who is elected by the council) and is made up of other senior partners. The management team develops and suggests regulations for the board to approve. It also develops strategy for the board to follow. The steering groups are given power by the board to promote and ensure compliance with KPMG strategy and regulations. This body works closely with member firms to explain audit and management policies. It is also responsible for identifying and mitigating risks to the KPMG brand.

KPMG member firms offer audit, tax, and advisory services in many different industries. Some of the industries in which the brand specializes include asset management, the automotive sector, banking, the chemical industry, consumer products, the retail industry, the energy sector, and natural resources. KPMG firms specialize in advisory services dealing with regulatory change, digital adoption, environmental sustainability, regulatory compliance, business performance, and business protection.

History

Although KPMG did not officially form until the 1980s, its origins date back to the late nineteenth and early twentieth centuries. With increasing business opportunities brought about by the Industrial Revolution, accounting was elevated to a necessity for any business. At first, accounting firms were mostly small and helped only a few local clients. However, over time, mergers and growth created large firms that serviced numerous clients.

In 1891, a British accountant named Sir William Barclay Peat took over a United Kingdom accounting firm that he renamed WB Peat & Company. At about the same time, Scottish accountant James Marwick opened an accounting firm in Glasgow, Scotland. He later relocated his business to the United States, where he believed he would find more opportunities. In 1911, Marwick and Peat met during a trip and agreed to combine their firms. They created the accounting firm Peat, Marwick & Mitchell.

In 1917, Dutch accountant Piet Klynveld opened a firm in Amsterdam, the Netherlands. The firm grew and eventually became known as Klynveld Kraayenhof & Co. (KKC). In 1953, German accountant Reinhard Goerdeler joined the firm of Deutsche Treuhand-Gesellschaft (DTG), which had been started decades earlier by the Deutsche Bank. Goerdeler encouraged DTG to merge with another company so that it would have more opportunities to work in other parts of Europe. In the 1970s, KKC and DTG merged to become Klynveld Main Goerdeler (KMG).

By the 1970s, Peat, Marwick, Mitchell, & Co. had become an international organization with a large, diverse clientele. The company restructured in 1978 and changed its name to Peat Marwick International (PMI). In 1986, Peat Marwick International and KMG announced they would merge, and the next year, they formed KPMG—a name taken from Klynveld, Peat, Marwick, and Goerdeler, the company’s four founders.

When the merger formed KPMG in the 1980s, KPMG was considered the largest accounting firm in the world. The merger was itself the largest of its kind at the time. By 2000, the KPMG network was considered the world’s fourth-largest accounting and consulting firm. At about that time, one of KPMG’s largest member firms was in the United States. In 1990, the KPMG firm in the United States reportedly contributed $1.8 billion in revenue to the company’s total of $5 billion that year. Because of the firm’s success, it was spun off in 2001 and became public. It was renamed BearingPoint, but it filed for bankruptcy less than a decade later in 2009. In the 2020s, KPMG International removed firms in Russia and Belarus from its network, eliminating its work in those countries. In 2024, KPMG Switzerland and KPMG UK voted to merge their partnerships to create a new business. The KPMG organization changes constantly as other KPMG member firms have merged with each other, spun off from the organization, or closed.

Impact

While KPMG was the largest accounting firm in the world at the time of its 1987 merger, it later became known as one of the big four accounting firms, along with EY, PricewaterhouseCoopers, and Deloitte. KPMG has offices around the world and maintains close ties with world governments, multinational corporations, and large nongovernmental organizations. Along with the members of the big four and other large professional services companies, KPMG is seen as one of the most influential accounting organizations in the world. In some cases, its work has been criticized for being unethical and sometimes illegal.

KPMG member firms, and therefore the entire KPMG brand, have been accused of unethical and illegal accounting, auditing, and tax payment practices. For example, in 2004, KPMG was involved in a lawsuit brought by shareholders of a Belgian company called Lernout & Hauspie Speech Products. The speech-recognition software company had crashed in the tech bubble of the early 2000s, and shareholders accused KPMG of failing to stop the company from filing misleading financial statements. KPMG agreed to pay $115 million to settle the suit.

In the 2010s, the United Kingdom’s Financial Reporting Council (FRC) accused a senior KPMG partner of lying during the FRC’s investigation into KPMG’s involvement in a 2011 company acquisition. KPMG worked for the investment firm HIG and helped HIG acquire a company called Silentnight. The FRC accused KPMG of helping to put Silentnight into insolvency so that HIG could acquire the business for less money.

In the late 2010s, KPMG was accused of wrongdoing in its auditing practices. The Abraaj Group, a private equity firm based in Dubai,faced accusations that it had mismanaged a $1 billion healthcare fund. The firm hired KPMG in 2018 to conduct an audit, which absolved the Abraaj Group of any wrongdoing. However, investors in the private equity firm were suspicious of the quality of the audit in part because of numerous conflicts of interest that KPMG failed to disclose. For example, a KPMG employee also worked at the Abraaj Group, and KPMG did audit work for some of the companies in which the Abraaj Group had invested.

In the early 2020s, KPMG and other business services firms made international headlines when they closed or suspended their operations in Russia. In 2022, Russia’s leader Vladimir Putin orchestrated an invasion of Ukraine, which was once part of the Soviet Union. The attack was condemned by governments around the world and prompted international businesses to halt their work in the country. KPMG said that its firms in Russia and Belarus (a Russian ally) would leave the KPMG network. The decision affected more than four thousand employees and partners in the two countries. In April 2023, KPMG was implicated in the failure of two US banks, Silicon Valley Bank and First Republic Bank. KPMG, who served as First Republic’s auditor, was sued by shareholders for alleged financial misstatements.

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