Bloomberg reported today that KPMG UK CEO Jon Holt told them the firm plans to raise audit fees, news that comes on the same day we find out KPMG UK revenue increased 12% to £2.72 billion ($3.3 billion) for their fiscal year ending in September. Much of that did not come from audit however, deal advisory is up 24% and consulting 22%. Consulting will continue to be the main engine of growth in 2023, while deal advisory is expected to grow at a slower pace, wrote Bloomberg.
KPMG expects to increase its audit fees this year as the accounting firm looks to offset higher costs from regulatory requirements and operating expenses.
“The price of audit will have to increase this year,” the firm’s UK chief executive officer Jon Holt said in an interview with Bloomberg as the firm published its annual results. “The sector is facing a number of upward cost drivers, from new audit and accounting standards to inflationary pressures.”
“Higher costs from regulatory requirements” may include the numerous Financial Reporting Council fines levied against KPMG in recent years. For the fiscal year ended March 2022, audit firms in the UK were fined a record £46.5 ($57.3 million USD), more than half of that was levied against KPMG alone for a grab bag of audit mishaps. Total FRC fines are up £16.7 million from the fiscal year prior and the regulator is taking a similar approach to our own PCAOB this side of the Atlantic: zero tolerance.
KPMG is not unique in raising fees, revenue generation for the FRC Fine Department aside (note: no such department actually exists). In December, Big 4 firms’ largest clients across the pond wrote a strongly-worded letter about audit fee increases. “At this time of increasing cost pressure on big business we should not be expected to pick up the escalating costs within service company supply chains through further price increases,” read the CFOs’ letter to their auditors. “[The CFOs] do not commission our work and they are not the ones who we are reporting to,” said one audit partner in response to the letter.
The Bloomberg article goes on to discuss KPMG UK partner pay — the lowest of Big 4 firms at £717,000 for each of the firm’s 786 partners — and investments in people and technology:
KPMG UK said it invested £130 million into new hires and technology in 2022 as part of a push to expand the range of services it offers to clients. The firm also increased its bonus pot to over £105 million.
The firm hired over 4,500 people in the 12 months to September, and has a total of 16,036 employees on its payroll.
“Every area of the business contributed to our growth, showing the important role our multi-disciplinary model plays to support our clients,” said Jon Holt, KPMG’s UK chief executive officer.
Is that a dig at EY? Oh yeah, definitely is.
KPMG UK CEO Says Audit Fees Will Increase Despite Complaints [Bloomberg]
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