We are living in an increasingly complex and fragmented world. Large transformations that excite and challenge are underway, with technological advancements and ESG spearheading the change. At the same time, our economy remains vulnerable to outside geopolitical shocks. We have embraced the transformational journey in everything we do: starting with our own Impact Plan on Planet, People, Prosperity and Governance, and embedding these in our services and solutions to the market, in both Assurance and Advisory.
The past year was heavily marked by our investigation into answer sharing. We found that over the last five years over five hundred people, of all levels of seniority, had engaged in some form of improper answer sharing. We went through an intense process, including detailed investigative activities, establishing the facts, sanctioning everyone involved appropriately for the individual’s level of involvement and seniority, while doing our utmost to keep our processes firm and fair for everyone.
In April 2024, we reached a Settlement Order with the US Public Company Accounting Oversight Board (PCAOB) and started a process of intensive supervision with the AFM on the remediation actions. These actions focus on how to prevent answer sharing from happening again but also have a broader scope, working out which aspects of our culture we must improve to prevent unethical behavior in the first place.
Let me be clear: answer sharing is wrong and we should have prevented it. That is why we apologized to our clients and stakeholders. In matters of trust and integrity, even one irregularity is one too many. We need to learn from this as our clients and stakeholders need to rely on our quality and integrity as this is core to our role in society. Trust is our license to operate. I deeply regret that this misconduct happened in our firm. The conclusions are damning, and the penalty of $25 million is a reflection of that.
Live up to our values
Times like these require our continued and relentless focus on quality, trust and the value we bring. Times like these also demand leadership. That leadership in turn requires courage and, above all, clear values. We are learning from what happened and will use it to drive positive culture change, with our values – Integrity, Excellence, Courage, Together, For Better – serving as a compass to steer us toward our purpose.
We are taking decisive steps. We have reviewed our approach to mandatory testing and have made meaningful changes to our learning and development programs. We have also been implementing controls to monitor whether training tests are being completed appropriately and will continue to do so going forward. We will continuously improve, and we must ensure we deliver our training sessions appropriately, and sustainably.
We have started a dialogue about our ethical culture – first with our partners and directors, and then with all levels of leadership. We are discussing ethical dilemmas and choices, experiences and behaviors, reasserting the importance of speaking up and holding each other accountable. We are committed to, as the cliche goes, not wasting a good crisis but instead embracing the learnings and harnessing a new impetus to be the ever-better firm we want to be.
We are securely building upon our focus on our quality-oriented culture, by prioritizing critical professional judgment, encouraging open communication and psychological safety within our teams, good planning and predictability of work volume and investing in our learning organization. We realize that the attractiveness of the audit profession is under pressure, and we are working to engage and inspire our professionals with work that is relevant, societally impactful, technologically advanced and based on deep values of quality and excellence.
The financial results of the year included the costs of the investigation and the penalty imposed by the PCAOB. Operationally, we showed solid results, with steady growth in revenues in both Assurance and Advisory, aligned with our long-term strategy.
The long term: pushing new boundaries
We are steadily progressing on our long-term strategic objectives. Together with our clients and alliance partners, we are pushing new boundaries. We are using groundbreaking AI-based applications to obtain audit evidence, and we are expanding our cooperation with our alliance partners like Microsoft, SAP and ServiceNow. Within KPMG, we have established the Netherlands as a hub for ESG and digital innovation – a vital contribution to our network’s increasingly aligned collective strategy.
Over the past year, we finalized the roll out of KPMG Clara, our new smart global audit platform – another step toward our objective to carry out a digitally-enabled audit. We are convinced that this will further improve quality, allow for greater integration of AI, and lay the foundation for new operating models where standardization and automation underpin quality. This is how we will meet society’s growing expectations.
At the same time, we are well positioned to support clients in their sustainability transition given our deep ESG expertise combined with our capabilities in strategy and operations, systems and processes, change management and reporting. To support our leadership position, we have started to embed ESG thinking into all of our own solutions, internal processes and decision-making – what we call 'watermarking' ESG in all we do. In our own People commitments, we have established a 50% gender balance on our Board of Management and Supervisory Board.
Investing in people
We are proud of the dedication, energy and resilience of our people. By engaging with everyone and continually listening, we have managed to maintain high rates of retention. But we cannot afford to rest on our laurels. That is why we are working to ensure that KPMG N.V. remains an attractive place to work – where everyone feels comfortable, safe and supported, and has opportunities to learn and develop. Our approach is one of intentional inclusion because we realize that a diverse, inclusive, equitable workplace simply will not be achieved without consistent policies and processes, and the active sponsorship of all levels of management.
Transform, courageously
Over the past year, we have made strategic investments totaling more than EUR 40 million in improving quality, innovation, digitalization and ESG – in lockstep with our international network. Our commitment to long-term investment and strategy implementation, along with continued growth in sales from both Assurance and Advisory, underpin the confidence that our expertise will remain in demand in the coming years, despite continued economic and political turbulence.
These investments are for the future – in our digital and data capacity, in our readiness for the expansion of AI, in our new target operating models and in our alliances. More importantly, we invest in our people, in their knowledge and expertise, and in their quality and excellence. Because as KPMG, we have a role to play in the big transformations underway: digitalization, the search for sustainable economic growth, and the creation of a fairer, more equitable society.
Changes in Board of Management and Supervisory Board
We have started the new fiscal year with a renewed management team, with Mariska van de Luur as our Head of Assurance. Her expertise in people management and implementing culture programs will be critical to us as we look to strengthen our ethical culture, while focusing on further increasing audit quality. I wish her success on behalf of all of us at KPMG. We have also welcomed Sandra Berendsen as a new member of our Supervisory Board for her first four-year term, and Bernard Wientjes to serve as Chair for a maximum period of 18 months. We strongly believe that, with the diversity of experience and leadership perspectives across these two boards, we have the governance structure to continue on the path of trust and growth for the future.
Stephanie Hottenhuis
CEO of KPMG N.V.