KPMG UK Revenue and Audit Criticism: Management Accounting Report

This report analyzes a Financial Times article discussing KPMG's revenue growth despite audit criticisms. It details management accounting issues, including poor audit quality, regulatory investigations, and loss of clients. The report outlines the selection process of the article through meeting minutes, identifies KPMG's strengths (revenue growth, shareholder bonuses) and weaknesses (audit quality, regulatory scrutiny), and proposes solutions such as enhancing computerized systems for data accumulation, integrating cost accounting software, improving audit processes, and hiring qualified employees. The report aims to mitigate weaknesses, enhance reputation, and regain lost clients, ultimately addressing the core management accounting issues highlighted in the article.

1
Running head: Assignment
Article- “KPMG UK revenues rise at
fastest rate for decade despite audit
criticism”
Source: Marriage, M. (2018). KPMG UK revenues rise at fastest rate for decade despite audit
criticism | Financial Times. [online] Ft.com. Available at: https://www.ft.com/content/293bc9b2-
f864-11e8-af46-2022a0b02a6c [Accessed 27 Dec. 2018].

Assignment
Table of Contents
Minutes of 1st meeting.....................................................................................................................3
Minutes of 2nd meeting.....................................................................................................................3
Minutes of 3rd meeting.....................................................................................................................3
Management accounting issues raised by the article.......................................................................3
Solutions..........................................................................................................................................5
References........................................................................................................................................8
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Minutes of 1st meeting
For gaining significant knowledge about management accounting issues and strategies for
mitigation, four articles were selected from credible sources by our group. Each member stated
their own views about their respective articles i,e. (Ft.com. 2018). Then the next meeting was
performed for analysing the articles of each other to select the best one.
Minutes of 2nd meeting
After reading some other articles like (StockNews.com. 2018), each member tried to make a
discussion to identify the appropriate article. Each member shared his own thoughts based on the
articles of other members. Based on such analysis, the next meeting had been decided for
selecting the best one.
Minutes of 3rd meeting
Lastly after making several discussions and reviewing each other articles, the present article had
been selected due to its appropriateness compared to others and i.e. (Marriage, 2018). In
addition, this article has depicted the critical issue of management accounting which other
articles failed to illustrate. Additionally, rest of the three articles were not selected from an
appropriate source which failed its appropriateness for this assignment as well.
Management accounting issues raised by the article
KMPG is one of the Big Four as well as professional service companies along with Deloitte,
Price waterhouse Coopers and Ernst & Young. It is positioned in Amstelveen and Netherlands
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Assignment
with total strength of more than 207, 050 people. It has three lines of service like advisory,
financial audit, and tax. Based on the article, ‘KPMG UK revenues rise at the fastest rate for a
decade despite audit criticism’ published in Financial Times by Madison Marriage, it has been
analyzed that the revenue of the company is rapidly rising despite of its crushed reputation due to
the management accounting issue. The potential strengths that have been identified in the article
are the profits before tax as well as shareholder bonuses that rose by 35 % (Marriage, 2018). In
addition, the results based on their revenue were also quite significant to consider as its strength
as it assisted the company to generate huge sales as illustrated in Fig: 1.
Fig: 1 (Increasing sales of KPMG)
Source: (The Financial Times)
Moreover the article has provided evidence about the financial growth of the company that
reflects its strength explicitly. It has been also analysed that the company KPMG has attained
growth in sales and revenue by 8% despite of its lack of reputation in the market. In addition, the
figure that has been illustrated in the article based on its earnings per share also depicted a
growth in the financial performance of the firm (Marriage, 2018). The criticism about the firm
that has been identified in the article based on the loss of audit clients as well as the issue of
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Assignment
Gupta family highly validated the management accounting issue of the firm. However, it has
been well illustrated in the article that there is a significant opportunity to enhance the auditing
processes of the company in order to retain its clients as well as to enhance their reputation in the
market. The investigation of UK accounting regulators as depicted in the article also reflects the
weakness of the firm that is one of the prime factors that resulted in the management accounting
issue.
On the other hand, it has been also analyzed from the article that the weaknesses would be
critical for the firm’s success in long-term. The article also highly depicted that the weaknesses
of the firm would get increased due to the increasing provisions of fines imposed over the firm
due to the quality of audit. It has increased from £56m to £73m in the past twelve months
(Marriage, 2018). One of the major weaknesses that have been identified in the article are the
ability of the firm to enhance their management accounting issue based on the quality of audit
that resulted in the loss of potential clients along with criticisms from the regulators and
politicians. That resulted in loss of the firm in the current scenario. Furthermore, the
investigations of KMPG’s work on audit by the UK accounting regulator is also a potential
threat to the company as it would result in a bad reputation and it would increase the
interferences in business operations. On the other hand, the scandal in the US about the
regulatory inspections also created a significant threat for the company to operate in the market
and stay ahead in the competition.
Solutions
Being the consultant, the courses of action that needs to be integrated by the management in
order to tackle the issues identified evidently in the article is to enhance the quality of audits so
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Assignment
as resolve the management accounting issues explicitly. Firstly the firm also needs to enhance
its computerized system for accumulating information over expenses and revenues of its major
clients so as to improve its sustainable condition. Such accounting programs would highly assist
the owner and managers of the firm to deliver effective service to the clients that would enhance
the performance of the firm in the market as well as audit report. On the other hand, the
investigation of UK accounting regulators would be mitigated through the integration of cost
accounting software in order to create complex analysis. This would help to expand the
capabilities of the firm reducing the interference of political and regulatory bodies as such
analysis would also enhance the business performance and audit process of the firm. The issue of
increasing fines would adversely affect its revenue and profit. Hence, it would require an
effective analysis of the work-flow problem associated with audit so as to present proper
information to the clients. Such initiation would highly assist the company to gain potential
clients form the market as well as enhance its revenue at an elevated level.
In addition, the quality of the audit process needs to be enhanced with the engagement of
employees in order to deliver adequate services. As KMPG had a significant issue based on the
quality of audit for clients, so it is highly recommended to hire qualified employees or train
existing employees for managing the accounting department in order to deliver quality services
to the clients and reduce political and regulatory barriers. These procedures would certainly
assist KMPG to resolve its management accounting issues associated with poor quality of audit
affecting its clients in the market. The threats and weaknesses that had been identified would be
significantly mitigated through the proposed course of action. The strengths of having good
financial performance would assist to implement the course of action to enhance the reputation
and reduce the level of investigations explicitly. Furthermore, the clients that had been lost by
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Assignment
the firm KMPG would be certainly attained with the proposed course of action as it would ensure
the quality of audit as well as offer quality service to the clients. Hence, the research article about
KMPG is a significant illustration of management accounting issue based on poor quality of
audits for the clients. This in turn created a bad reputation of the company in the market as well
as resulted in loss of potential clients. The proposed course of actions would highly assist the
company to mitigate each weaknesses and threats raised in the article evidently. In addition, it
would also assist to gain competitive edge and clients from the market.
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References
Source (Selected)-
Marriage, M. (2018). KPMG UK revenues rise at fastest rate for decade despite audit criticism |
Financial Times. [online] Ft.com. Available at: https://www.ft.com/content/293bc9b2-f864-
11e8-af46-2022a0b02a6c [Accessed 27 Dec. 2018].
Other articles Considered in 3 meetings
Ft.com. (2018). Big four accountants have their annus horribilis | Financial Times. [online]
Available at: https://www.ft.com/content/8f28a750-02e5-11e9-9d01-cd4d49afbbe3 [Accessed 26
Dec. 2018].
Available at- https://www.ft.com/content/8f28a750-02e5-11e9-9d01-cd4d49afbbe3
StockNews.com. (2018). Apple Inc.(Nasdaq:AAPL): Forensic Accounting Team Has Concerns
About Apple Inc. (AAPL) | StockNews.com. [online] Available at:
https://stocknews.com/news/aapl-forensic-accounting-team-has-concerns-about-apple-inc-aapl/
[Accessed 26 Dec. 2018].
Available at- https://stocknews.com/news/aapl-forensic-accounting-team-has-concerns-about-
apple-inc-aapl/
The Independent. (2018). Sainsbury’s reports higher sales but warns bank profits will take a hit
this year. [online] Available at: https://www.independent.co.uk/news/business/news/sainsburys-
sales-bank-profits-record-christmas-sales-asda-deal-a8328931.html [Accessed 26 Dec. 2018].
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Assignment
Available at- https://www.independent.co.uk/news/business/news/sainsburys-sales-bank-profits-
record-christmas-sales-asda-deal-a8328931.html
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