Our ambition is to be recognized as a leading brand in the Dutch market, known for exceptional audit quality and leadership in the digital and ESG transitions – thereby fostering trust, societal awareness, and talent attraction. As a values-driven organization, with integrity and excellence at our core, we view trust as the cornerstone of our relationships. Our aspiration is clear and bold: to become the most trusted and trustworthy professional services organization. Achieving this goal requires us to deliver quality audits and to communicate transparently about our audit quality journey with our stakeholders. Any compromise would result in a potential financial risk.
We define audit quality as the consistent delivery of assurance engagements that meets both the requirements and the intent of professional standards, underpinned by a robust quality management system. To address any potential risks, each of our activities is conducted within a framework of objectivity, independence, ethics, and integrity. We recognize that providing quality services demands diligence, dedication, and an unwavering focus, supported by investments in the people and technology that drive excellence.
At KPMG N.V., we are committed to continuously enhancing our approach to quality. As a technology-driven organization, we leverage next-generation technology – including AI – to deliver superior audit and assurance services. In collaboration with our global KPMG network, we embed audit quality in our daily operations to meet and exceed the expectations of our clients and stakeholders.
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G1 Business conduct |
Impact materiality |
Financial materiality |
Value chain |
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Positive |
Negative |
Opportunity |
Risk |
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(Audit) quality focus (incl. AQIs) |
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|
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As an auditor, we see it as our role to challenge our clients, to demonstrate professional skepticism, and to issue an opinion on which society knows it can rely. For that reason, focusing on quality audits and the continuous improvement of audit quality is a top priority and a permanent part of our strategic agenda, supported by the investments and improvements that we leverage from the global KPMG network. Specifically, our audit quality strategy is built on two elements: our people and our technology.
First and foremost, our people apply high standards of trust and integrity in doing the right thing. We invest structurally in the education and development of our people. We know that each of us has a responsibility to serve the public interest, and we therefore embody a steadfast dedication to and focus on ensuring that we uphold our firm’s standards as well as those of our profession. We learn from positive and negative experiences alike and seek opportunities to improve the rigor, reliability, and quality of the audit process.
The second element of our audit quality strategy is technology. We aim to transform the audit experience and approach in order to make audits as digitally enabled as possible, while continuing to bring our human attributes and apply professional skepticism to every engagement. As part of our ongoing investment in this goal, we are harnessing next-generation AI-driven technology, such as KPMG Clara and other tooling, to power our audits.
In addition, assurance over non-financial reporting relating to ESG is an emerging area in the audit field, and expectations around reporting on ESG are rapidly changing. Many businesses are striving to improve the quality of their reporting and controls around ESG data.
At KPMG N.V., we are committed to fulfilling our public trust role by providing assurance on sustainability reporting that can benefit investors and other stakeholders.
Businesses are preparing to report under new reporting standards: primarily the CSRD (including the ESRS, EU Taxonomy regulation, and digital reporting requirements), but also the new ISSB standards.
4.1.1 IRO management: Key policies and actions related to audit quality
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Policy name |
Key contents |
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Quality & Risk Management Manual |
Our Quality & Risk Management manual covers the scope, requirements, and procedures related to quality and risk management for all KPMG member firms and personnel, including the System of Quality Management (ISQM1) and its components. |
Our continuous improvement efforts, based on our global audit quality approach, have driven advances in many areas. All our policies and actions related to audit quality are built on the KPMG Global Quality Framework and captured in the Quality & Risk Management Manual, which aligns with relevant EU and Dutch legislation and the requirements of the NBA and the PCAOB. While the Global Quality Framework applies to our entire workforce, its guidance is particularly relevant for our Assurance teams. The effective implementation of this framework is ensured by our Audit Quality Professional Practice department and overseen by our Head of Assurance. The information in our policies – such as our KPMG N.V. Quality & Risk Manual, which includes our KPMG N.V. and applicable KPMG International directives – is made available to relevant stakeholders through mandatory trainings, our intranet, and our internal and external reporting.
The main objectives and actions in our Global Quality Framework are as follows:
We have implemented a consistent, risk-based approach to our System of Quality Management (SoQM) to drive audit and assurance quality and enable compliance with the requirements of the International Standard on Quality Management (ISQM) 1.
We have implemented processes and systems, including our AQIs, to monitor and enhance our audit quality.
We have transformed the audit experience for our clients and our audit professionals by delivering a digital audit experience and approach, powered by KPMG Clara, that drives consistency and quality.
We use technologies, including AI, in client engagements and leverage our alliances with technology leaders, including Microsoft and MindBridge, to further enhance quality and provide even more value through deeper business analysis.
We have launched quality initiatives to integrate new regulatory requirements and to further drive the identification and remediation of quality issues.
4.1.2 Metrics, targets, and performance on audit quality
4.1.2.1 General progress
Having invested in our SoQM over many years, we are now seeing the benefits of this in our inspection results. However, audit quality is an ongoing journey. Our focus remains on investing in and innovating continuous improvements with the goal of further improving our performance on audit quality, measured via the AQIs. In 2023/2024:
We brought AI technology into the audit process through KPMG Clara, the global operating system for KPMG’s Assurance activities, empowering our professionals to further enhance quality by focusing on higher-risk audit areas and sector-specific risks and challenges.
We took a consistent risk-based approach in our SoQM to drive audit quality and meet ISQM 1 requirements.
We adopted KPMG International’s Consider, Assess, Respond, Evolve (CARE) framework to support ethical decision-making.
We introduced the engagement management life cycle (EMLC) as a tool to bring work forward and improve audit quality.
4.1.2.2 Audit quality performance and AQIs
To monitor audit quality within Assurance, we have determined a set of AQIs. Target-setting occurs as part of the annual business plan process, substantiated in more detail in the annual audit quality plan. Based on prior-year results, future ambitions, and developments in the sector – for example, recommendations by the quartermasters – the Head of Audit Quality proposes targets that are discussed with and approved by the Assurance Leadership Team and the Board of Management respectively.
We analyze our AQI results bi-annually and define specific actions for improvement in case of underperformance. In 2023/2024, we met or exceeded our thresholds for 10 of the 12 AQIs for which a performance score is included, giving an overall score of 83%.
Our AQIs
|
Target for 2023/2024 |
2023/2024 |
2022/2023 |
|
|
Results of internal KPMG N.V. audit inspections |
100% |
94% |
94% (restated)1 |
|
Results of external inspections2 |
100% |
n/a |
n/a |
|
% of engagements involving EQCR |
>20% |
32% |
29% |
|
EQCR hours spent as % of total hours spent on EQCR engagements (scope: all EQCR engagements excl. three largest clients) |
1.2%-2% |
1.2% |
1.2% |
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Partner hours: |
|||
|
in PIE audit engagements |
≥7% |
8% |
9% |
|
in non-PIE audit engagements |
≥6% |
6% |
6% |
|
Average number of hours spent in training per client-facing professional in audit |
>160 |
212 |
210 |
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Hours spent by IT and other specialists: |
|||
|
in PIE audit engagements |
≥9% |
18% |
18% |
|
in non-PIE audit engagements |
≥6% |
6% |
6% |
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Technical resources support (FTEs) as % of total audit FTEs |
>5% |
8% |
8% (restated)3 |
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Number of technical consultations as % of total audit engagements |
>10% |
16% |
19% |
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Financial statements with restatements as % of audit opinions issued |
<1% |
2% |
2% |
|
External independence violations as % of total Assurance headcount |
n/a |
0.3% |
0.2% (restated)4 |
|
Breaches of internal independence rules – not resulting in an external violation – as % of total headcount |
n/a |
3.0% |
7.9% (restated)2 |
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GPS results relating to coaching and audit quality |
≥85% |
78% |
81% |
Table 40
For the detailed definition per AQI, see Entity-specific definitions (new window).
In 2023/2024, our year-on-year performance on most of our AQIs was steady. Internal audit inspections rated “compliant” and “compliant - improvement needed” also remained steady at 94%. Of the 50 total files reviewed, 36 were rated compliant, 11 were rated compliant improvement needed and 3 were rated non-compliant. We strive for 100% of our files to be compliant and are working on several initiatives to empower our audit teams. The regular external (PCAOB) inspection of our engagement files is not yet finalized at the time of publication. With this review taking place every three years, no comparable data is available. The AFM conducted a theme-driven review by the end of 2022/2023, focused specifically on the involvement of the engagement quality control review (EQCR). The results of this review were finalized in 2023/2024. Theme-driven reviews are excluded from calculating the AQI on external inspections. As part of this inspection, the AFM reviewed our system of quality control regarding EQCR, noting no findings and one best practice. The AFM also reviewed four engagements with findings on two reviews. The AFM's review on fraud risk assessment will be finalized in late 2024. Other reviewers did not report any insufficient audit files during their inspections.
Engagements involving EQCR rose from 29% in 2022/2023 to 32% in 2023/2024. The percentage of EQCR hours spent in 2023/2024 was 1.2%, the same as the previous year. Partner hours spent on public-interest entity (PIE) audit engagements decreased slightly from 9% to 8%, while non-PIE engagements remained stable at 6%. Average training hours per client-facing professional in audit increased marginally from 210 to 212. Our GPS results on coaching and audit quality declined slightly from 81% to 78%.
IT and other specialists’ hours on PIE and non-PIE engagements remained unchanged at 18% and 6%, respectively. Technical resources support remained stable at 8%. However, the number of technical consultations dropped from 19% to 16%, mainly because of fewer mandatory consultations (on, for example, the situation in Russia/Ukraine).
As in the previous reporting year, our percentage of financial statements with restatements and independence violations did not meet our target in 2023/2024. By using RCA and implementing several actions, we are aiming to improve our performance next year.
Overall, the data reflects our focus on audit quality and on maintaining high standards. In 2024/2025, our goal is to further improve our Quality Performance Review (QPR) scores and to strengthen audit quality. We will do this through RCA, including analyzing recurring findings from our different quality initiatives. While our GPS results on quality show a slight decline compared to the previous year, we are refocusing on our ethical culture and behavioral elements that affect the quality of our work. We will also place more attention on targeted and relevant learning in live and virtual classrooms, coaching on quality, and the sector-specific focus of our Audit Quality Professional Practice department. In addition, we will continue our workload-management initiatives as another means of ensuring our people have the right conditions to deliver quality work.