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To: the shareholders and Supervisory Board of KPMG N.V.

A. Report on the audit of the financial statements 2020/2021 included in the annual report

Our opinion

We have audited the financial statements for the year ended 30 September 2021 of KPMG N.V. based in Amstelveen. The financial statements comprise the consolidated financial statements and the company financial statements.

WE HAVE AUDITED

OUR OPINION

The consolidated financial statements comprise:

In our opinion, the accompanying consolidated financial statements give a true and fair view of the financial position of KPMG N.V. as at 30 September 2021 and of its result and its cash flows for 2020/2021 in accordance with International Financial Reporting Standards as adopted by the European Union (EU- IFRS) and with Part 9 of Book 2 of the Dutch Civil Code.

1.

the consolidated statement of financial position as at 30 September 2021;

2.

the notes comprising a summary of the significant accounting policies and other explanatory information.

3.

the following statements for 2020/2021: the consolidated income statement, the consolidated statements of comprehensive income, changes in equity and cash flows for the year then ended; and

The company financial statements comprise:

In our opinion, the accompanying company financial statements give a true and fair view of the financial position of KPMG N.V. as at 30 September 2021 and of its result for 2020/2021 in accordance with Part 9 of Book 2 of the Dutch Civil Code.

1.

the company balance sheet as at 30 September 2021;

2.

the company profit and loss account for 2020/2021; and

3.

the notes comprising a summary of the applicable accounting policies and other explanatory information.

Basis for our opinion

We conducted our audit in accordance with Dutch law, including the Dutch Standards on Auditing. Our responsibilities under those standards are further described in the ‘Our responsibilities for the audit of the financial statements’ section of our report.

We are independent of KPMG N.V. in accordance with the EU Regulation on specific requirements regarding statutory audit of public-interest entities, the Wet toezicht accountantsorganisaties (Wta, Audit firms supervision act), the Verordening inzake de onafhankelijkheid van accountants bij assurance-opdrachten (ViO, Code of Ethics for Professional Accountants, a regulation with respect to independence) and other relevant independence regulations in the Netherlands. Furthermore we have complied with the Verordening gedrags- en beroepsregels accountants (VGBA, Dutch Code of Ethics).

We believe the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Materiality

Based on our professional judgement we determined the materiality for the financial statements as a whole at € 5,600,000. The materiality has been calculated with reference to a benchmark of a normalised reported profit before income tax and management fee which we consider to be one of the principal considerations for users of the financial statements in assessing the financial performance of the company. We have also taken into account misstatements and/or possible misstatements that in our opinion are material for the users of the financial statements for qualitative reasons.

We agreed with the Supervisory Board that misstatements in excess of € 280,000, which are identified during the audit, would be reported to them, as well as smaller misstatements that in our view must be reported on qualitative grounds.

Scope of the group audit

KPMG N.V. is the head of a group of entities. The financial information of this group is included in the consolidated financial statements of KPMG N.V.

Our group audit mainly focused on significant group entities. We consider an entity significant when:

  • it is of individual financial significance to the group; or

  • the component, due to its specific nature or circumstances, is likely to include significant risks of material misstatement, whether due to fraud or error of the group financial statements.

To this extend, for the purpose of the audit of group financial statements, we performed audit procedures to all of the group entities, being; 

  • KPMG Accountants N.V.;

  • KPMG Advisory N.V.;

  • KPMG Staffing & Facility Services B.V.

By performing the procedures mentioned above at group entities, together with additional procedures at group level, we have been able to obtain sufficient and appropriate audit evidence about the group’s financial information to provide an opinion on the consolidated financial statements.

B. Information in respect of our opinion

The information below and our findings in respect of going concern, fraud risk, non compliance and key audit matters were addressed in the context of our audit of the financial statements as a whole and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Going concern

Management assessed the Company’s ability to continue as a going concern and to continue its operations for at least 12 months beyond the date when the financial statements are issued. Based on this analysis, management is of the view that this does not result in actually identified events or conditions that may cast significant doubt on the entity’s ability to continue as a going concern.

Our audit procedures in relation to going concern consists of:

  • We discussed and evaluated KPMG’s going concerns assessment with management exercising professional judgment and maintaining professional skepticism. We reviewed management’s process for preparing their assessment, and in particular management’s bias that could represent a risk, and the impact of current events and conditions on the Company’s operations and forecasted cash flows. We focused on whether the Company will have sufficient liquidity to continue to meet its obligations as they fall due.

  • We considered, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern.

  • We inspected minutes of the Supervisory Board, Audit & Risk Committee and Board of Management.

Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause a company to cease to continue as a going concern. Based on the audit evidence obtained up to the date of our auditor’s report, we support management’s going concern assumption on accounting.

Our focus on the risk of fraud and non-compliance

Our risk assessment

As described in section “Risk Mitigation and controls” of the Integrated Report, KPMG performs an internal risk analyses (including fraud, corruption and compliance) as part of the annual enterprise risk assessment.

We analysed KPMG’s internal risk analysis to obtain an understanding of KPMG’s risk assessment, the processes for identifying and responding to the risks of fraud and the internal controls that management has established to mitigate these risks. We discussed KPMG’s risk assessment and challenged these with management and those charged with governance. For this, we also made use of our questionnaire about compliance, as completed by management of KPMG N.V.

Furthermore we have performed our own risk assessment procedures to identify potential risks of material misstatement due to fraud and non-compliance with laws and regulations that are not yet identified by the internal risk analyses performed by KPMG. We also specifically evaluated whether fraud risks factors are present, based on the framework of the fraud triangle during several team discussions. As part of this assessment, we specifically assessed how fraud risks can arise in the revenue recognition as part of the unbilled revenue process and reflected this in our risk assessment and audit approach.

Our audit is not aimed specifically at detecting fraud. In planning our audit procedures, we took into account the risk that the financial statements might contain material misstatements as a result of fraud and error.

Our response to the risk of fraud

We determined an overall audit response to address the assessed fraud risks and risk of non-compliance with laws and regulations. We designed and performed tailor-made audit procedures whose nature, timing and extent are responsive to the assesses risk.

In accordance with the auditing standards we evaluated the following fraud risks are relevant to our audit:

  • Fraud risk in relation to revenue recognition and valuation of unbilled services.

  • Fraud risk in relation to management override of controls.

We defined the process of revenue recognition and valuation of unbilled services as a key audit matter, so we refer to this part of our opinion for further information.

Our audit procedures to respond to the fraud risk of management override of controls included:

  • We performed inquiries with management and inspected the minutes of the Supervisory Board, Audit & Risk Committee and Board of Management.

  • We evaluated the design and the implementation and, where considered appropriate, tested the operating effectiveness of internal controls that mitigate fraud risk.

  • Supplementary to reliance on internal controls, we performed substantive audit procedures, including detailed testing of journal entries with a risk-based approach.

  • We audited significant accounting estimates (such as valuation of unbilled services) for biases and evaluated whether the circumstances producing the bias, represent a risk of material misstatement due to fraud. As part of this we performed a retrospective review and evaluated the judgements and decisions made by management in making the estimates in current year.

  • Furthermore we incorporated elements of unpredictability in our audit and we remained alert for indications of fraud. Also we evaluated whether final analytical procedures performed near the end of the audit are consistent with our understanding of the group. We obtained written representations that all known instances of (suspected) fraud or non-compliance with laws and regulations have been disclosed to us.

Our response to the risk of non-compliance with laws and regulations

Our audit procedures in relation to non-compliance with laws and regulations notably consists of:

  • We inquired the procedures for compliance with laws and regulations with relevant personnel (i.e. Supervisory Board, Audit & Risk Committee, Board of Directors, CFO, Quality & Risk Management and Legal) and we also performed inquiries with them as to whether KPMG N.V. is in compliance with such laws and regulations.

  • We inspected minutes of meetings of the Supervisory Board, Audit & Risk Committee and Board of Management.

  • We inspected correspondence with the relevant regulators which include AFM.

  • During the audit, we remained alert to the possibility that other audit procedures applied may bring instances of non-compliance or suspected non-compliance with laws and regulations to our attention.

The audit procedures described above have resulted in sufficient and appropriate audit evidence to mitigate or rebut the potential fraud risks and non-compliance risks. For an overview of our responsibilities and those of the management regarding the financial statements and the risks of fraud and non-compliance, we refer to Section E of this auditors report.

Our key audit matter

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements. We have communicated the key audit matter to the Supervisory Board. The key audit matter is not a comprehensive reflection of all matters discussed.

These matters were addressed in the context of our audit of the financial statements as a whole and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

The key audit matter “completeness and valuation of the provision for claims and legal proceedings”, which was included in our prior year’s auditor report is not considered a key audit matter for this year. The degree of estimation uncertainty in 2020/2021 is considered to be low compared to last years. Also, the key audit matter “Impairment intangible fixed assets” is no longer a key audit matter for this year as the Board of Management of KPMG N.V. decided in 2019/2020 to suspend further investments in the digital risk platform and terminated the contracts with developer and customer. Furthermore, the key audit matter “Covid-19 Pandemic” is no longer a key audit matter for this year because the impact and consequences on KPMG’s going concern assumption including the degree of estimation uncertainty in certain areas of the financial statements 2020/2021 is considered to be low.

REVENUE RECOGNITION AND VALUATION OF UNBILLED SERVICES

OUR AUDIT APPROACH

The existence of revenue and valuation of unbilled services (presented as contract assets or contract liabilities in the financial statements) is a key audit matter due to its significance and the fact that revenue recognition and valuation of unbilled services are subject to estimates of individual partners regarding the expected time to finalize fixed price engagements and realization of unbilled services.

Because the risk of fraud in revenue recognition is a presumed risk in our audit based on audit requirements, combined with the fact that revenue is a key business driver for KPMG, we consider revenue recognition to be a key audit matter.

The disclosure from KPMG N.V. on the revenue recognition and valuation of unbilled services is provided in notes 3.9, 3.13 and 5 to the financial statements.

We evaluated the revenue recognition process to ensure the policy is in accordance with IFRS 15. We also evaluated the internal controls related to revenue recognition and valuation of unbilled services.

Our audit procedures included, amongst others, assessing the appropriateness of the company’s revenue recognition accounting policies and performing substantive procedures relating to the recognition of revenue, including the timing of revenue recognition, calculation of deferred revenue and valuation of unbilled services.

We performed substantive procedures for revenue including reconciliation with authorized engagement letters, substantive procedures with respect to credit notes after balance sheet date and substantive procedures regarding the accuracy of hourly rates.

We have performed detailed testing of hours being spend, analysis of realization rates per engagement, analysis whether the balance of the work in progress at year-end is invoiced in the next financial year and tested the unbilled services by performing retrospective testing on the balance as of 30 September 2020. We discussed the findings of these analysis with the responsible management.

Our audit procedures resulted in sufficient and appropriate audit evidence to mitigate the risk of material misstatements related to the existence of revenue and/or the valuation of unbilled services.

C. Report on other information included in the annual report

In addition to the financial statements and our auditor’s report thereon, the annual report contains other information that consists of:

  • Introduction

  • Our business

  • Strategy & value creation

  • Governance

  • Appendix

Based on the following procedures performed, we conclude that the other information:

  • is consistent with the financial statements and does not contain material misstatements;

  • contains the information as required by Part 9 of Book 2 of the Dutch Civil Code.

We have read the above mentioned Other information and have viewed the videos as included by links to KPMG’s website. We have not read or viewed information as linked/referred to external websites. Based on our knowledge and understanding obtained through our audit of the financial statements or otherwise, we have considered whether the other information contains material misstatements.

By performing these procedures, we comply with the requirements of Part 9 of Book 2 of the Dutch Civil Code and the Dutch Standard 720. The scope of the procedures performed is substantially less than the scope of those performed in our audit of the financial statements.

Management is responsible for the preparation of the other information, including the management report in accordance with Part 9 of Book 2 of the Dutch Civil Code and other information as required by Part 9 of Book 2 of the Dutch Civil Code.

D. Report on other legal and regulatory requirements

Engagement

We were engaged by the Supervisory Board as auditor of KPMG N.V. on 9 March 2021, as of the audit for financial year 2020/2021 and have operated as statutory auditor ever since the financial year 2016/2017.

E. Description of responsibilities regarding the financial statements

Responsibilities of management and the Supervisory Board for the financial statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with EU-IFRS and Part 9 of Book 2 of the Dutch Civil Code. Furthermore, management is responsible for such internal control as management determines is necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error.

As part of the preparation of the financial statements, management is responsible for assessing the company’s ability to continue as a going concern. Based on the financial reporting frameworks mentioned, management should prepare the financial statements using the going concern basis of accounting, unless management either intends to liquidate the company or to cease operations, or has no realistic alternative but to do so.

Management should disclose events and circumstances that may cast significant doubt on the company’s ability to continue as a going concern in the financial statements.

The Supervisory Board is responsible for overseeing the company’s financial reporting process.

Our responsibilities for the audit of the financial statements

Our objective is to plan and perform the audit engagement in a manner that allows us to obtain sufficient and appropriate audit evidence for our opinion.

Our audit has been performed with a high, but not absolute, level of assurance, which means we may not detect all material errors and fraud during our audit.

Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. The materiality affects the nature, timing and extent of our audit procedures and the evaluation of the effect of identified misstatements on our opinion.

We have exercised professional judgement and have maintained professional scepticism throughout the audit, in accordance with Dutch Standards on Auditing, ethical requirements and independence requirements. Our audit included among others:

  • identifying and assessing the risks of material misstatement of the financial statements, whether due to fraud or error, designing and performing audit procedures responsive to those risks, and obtaining audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control;

  • obtaining an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control;

  • evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management;

  • concluding on the appropriateness of management’s use of the going concern basis of accounting, and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the entity’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause a company to cease to continue as a going concern;

  • evaluating the overall presentation, structure and content of the financial statements, including the disclosures; and

  • evaluating whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

Because we are ultimately responsible for the opinion, we are also responsible for directing, supervising and performing the group audit. In this respect we have determine the nature and extent of the audit procedures to be carried out for group entities. Decisive were the size and/or the risk profile of the group entities or operations. On this basis, we selected group entities for which an audit or review had to be carried out on the complete set of financial information or specific items.

We communicate with the Supervisory Board regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant findings in internal control that we identify during our audit.

We provide the Supervisory Board with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with the Supervisory Board, we determine the key audit matters: those matters that were of most significance in the audit of the financial statements. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, not communicating the matter is in the public interest.

Den Haag, 15 December 2021

For and on behalf of BDO Audit & Assurance B.V.,

N.W.A. van Nuland RA

Assurance report of the independent auditor

To: the shareholders and Supervisory Board of KPMG N.V.

A. Report on the non financial information as defined in Appendix ‘Reporting principles’ in the Integrated Report 2020-2021 of KPMG N.V.

Our opinion and conclusion

We have audited the below mentioned non financial indicators (‘NFI’s), item 1) till item 11), as included in the non-financial information as defined in Appendix ‘Reporting principles’ in the Integrated Report 2020-2021 of KPMG N.V., based in Amstelveen (hereafter: ‘The non-financial information’). An audit is aimed at obtaining a reasonable level of assurance.

The non-financial information includes:

  1. CO2 Emissions (see table CO2 emissions);

  2. Total number of employees (FTE’s) (see section Organisational structure);

  3. Percentage of employee engagement score (see section People);

  4. Client satisfaction and Net Promotor Score (NPS) (see section Clients);

  5. Quality Performance Reviews (QPR’s) (see section Public trust);

  6. Number of engagement quality controls reviews (EQCR’s) (see section Performance of effective and efficient audits);

  7. Community donations (see section Giving back);

  8. Number of statutory audits conducted for (non) public interest entities (PIEs) (see section Organisational structure);

  9. PIE Entity listings (see Appendix - List of public interest entity clients);

  10. Average absentee rate (average during the year) (see section Measuring employee engagement);

  11. Audit Quality Indicators (see section Audit Quality Indicators):

    • GPS and Pulse survey results related to coaching and audit quality (AQI 6a).

    • Investments in development of new audit technologies and tools (AQI 3);

    • Partner involvement (PIE) (AQI 1.a);

    • Partner involvement (Non-PIE) (AQI 1.b);

    • Hours spent by IT and other specialists (PIE) (AQI 11.a);

    • Hours spent by IT and other specialists (Non-PIE) (AQI 11.b);

    • Chargeable hours (AQI 2);

    • Retention of audit professionals (AQI 5);

    • Training hours per audit professional (AQI 4);

    • Technical resources support (AQI 7);

    • Technical consultations (AQI 8);

    • Results from external inspections (AQI 12a);

    • Results from internal inspections (AQI 12b).

In our opinion, the non-financial information NFI’s item 1) till item 11) in the Integrated Report 2020-2021 of KPMG N.V. present, in all material respects, a reliable and adequate view of:

  • the policy and business operations with regard to (audit) quality indicators as well as corporate responsibility, as represented in these NFI’s; and

  • the thereto related events and achievements for the year 2020-2021 

in accordance with the reporting criteria as included in section B. of this assurance report.

Basis for our opinion

We have performed our audit in accordance with Dutch law, including the Dutch Standard 3810N, ‘Assurance-opdrachten inzake maatschappelijke verslagen’(Assurance engagements relating to sustainability reports). Our responsibilities under this standard are further described in the section “Our responsibilities for audit of the non-financial information as defined in the Integrated Report 2020-2021 of KPMG N.V.” section of our report.

We are independent of KPMG N.V. in accordance with the ‘Verordening inzake de onafhankelijkheid van accountants bij assurance-opdrachten (ViO)’ (ViO, Code of ethics for professional accountants, a regulation with respect to independence) and other relevant independence requirements in the Netherlands. This includes that we do not perform any activities that could result in a conflict of interest with our independent assurance engagement. Furthermore we have complied with the ‘Verordening gedrags- en beroepsregels accountants’ (VGBA, Dutch code of ethics).

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion on item 1) till item 11).

B. Reporting criteria

The non-financial information needs to be read and understood together with the reporting criteria. KPMG N.V. is solely responsible for selecting and applying these reporting criteria, taking into account applicable law and regulations related to reporting.

The reporting criteria used by KPMG N.V. for the preparation of the non-financial information (NFI’s 1 till 11) are (based on) the Sustainability Reporting Standards of the Global Reporting Initiative (GRI Standards) and the applied supplemental reporting criteria as disclosed in section Non-financial information of the Integrated Report 2020-2021.

The absence of an established practice on which to draw, to evaluate and measure non-financial information allows for different, but acceptable, measurement techniques and can affect comparability between entities and over time.

C. Description of responsibilities

Responsibilities of management and the Supervisory Board for the non-financial information

Management is responsible for the preparation of reliable and adequate non-financial information in accordance with the reporting criteria as included in the section ‘B. Reporting criteria’, including the identification of stakeholders and the definition of material matters. The choices made by management regarding the scope of the non-financial information are summarized in Appendix ‘Reporting principles’ in the Integrated Report 2020-2021.

Management is also responsible for such internal control as the management determines is necessary to enable the preparation of the non-financial information that is free from material misstatement, whether due to fraud or error.

The Supervisory Board is responsible for overseeing the reporting process of KPMG N.V.

Our responsibilities for the audit of the non-financial information

Our responsibility is to plan and perform the audit procedures in a manner that allows us to obtain sufficient and appropriate audit and assurance to provide a basis for our opinion.

Our audit procedures have been performed with a high, but not absolute, level of assurance, which means we may not have detected all material errors and fraud.

We apply the ‘Nadere voorschriften kwaliteitssystemen)’ (NVKS, regulations for quality management systems) and accordingly maintain a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and other relevant legal and regulatory requirements.

We have exercised professional judgement and have maintained professional skepticism throughout the audit, in accordance with the Dutch Standard 3810N, ethical requirements and independence requirements.

Our audit included among others:

  • Performing an analysis of the external environment and obtaining an understanding of relevant social themes and issues, and the characteristics of the company;

  • Evaluating the appropriateness of the reporting criteria used, their consistent application and related disclosures in the non-financial information;

  • Obtaining an understanding of the systems and processes for collecting, reporting and consolidating the non-financial information, including obtaining an understanding of internal control relevant to our audit, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control;

  • Identifying and assessing the risks if the non-financial information is misleading or unbalanced, or contains material misstatements, whether due to errors or fraud. Designing and performing further audit procedures responsive to those risks, and obtaining audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk that the non-financial information is misleading or unbalanced, or the risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from errors. Fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. In order to obtain sufficient and appropriate assurance information we have carried out the following procedures for NFI’s item 1) till item 11):

    • Interviewing employees at KPMG N.V. who are responsible for the information which are the base for the non-financial information;

    • Reviewing the design and implementation for the collection and processing, including aggregation of data into non-financial information;

    • Performing analytical procedures for each individual NFI;

  • Reconciling each individual NFI with the primary source of assurance information;

  • Evaluating the overall presentation, structure and content of the sustainability information;

  • Considering whether the sustainability information as a whole, including the disclosures, reflects the purpose of the reporting criteria used.

Please note that we have not performed the mentioned audit procedures in this assurance report on the other NFI’s as included in the Integrated Report 2020-2021 and consequently do not provide assurance on these other NFI’s.

We communicate with the supervisory board regarding, among other matters, the planned scope and timing of the audit and significant findings, including any significant findings in internal control that we identify during our audit.

Den Haag, 15 December 2021

For and on behalf of BDO Audit & Assurance B.V.,

N.W.A. van Nuland RA