Financial Times: KPMG head predicts global partnership: “KPMG's Dutch partnership certified the accounts of the Royal Dutch/Shell group, but lawyers seeking damages over its reserves scandal are preparing actions against the firm's US partnership.” (ShellNews.net)
By Andrew Parker in London
Posted September 13 2004
The head of KPMG has forecast that the accounting firm could transform into a single global partnership within 10 years.
The radical reform would be a lasting solution to regulators' concerns that the big accounting firms offer inconsistent standards of audit work across the world.
Mike Rake, international chairman of KPMG, said the creation of a single global partnership would depend on regulatory changes, including new protection for auditors against catastrophic negligence claims.
He told the Financial Times: “One can see a time when the accounting firms might be able to form single partnerships . . . because life will have become more sensible and coherent from a regulatory point of view and a liability point of view.”
Mr Rake stressed that at this point KPMG had no plans to transform itself into a single global partnership. However, he said: “It is something we are going to have to look at very closely indeed. I personally think it would be on balance a good thing.”
The big four accounting firms Deloitte, Ernst & Young, KPMG and PwC portray themselves as unified, but their member partnerships enjoy great autonomy.
The firms' diffuse structures result from national laws that preserve auditors' independence by insisting they should not be influenced by outside interests.
But during the recent wave of business scandals, regulators expressed concern at the variable quality of audit work offered by the member partnerships.
Their concerns could lead to an easing of the national rules on outside interests, enabling global leaders to exert more control. Mr Rake predicted that some countries would harmonise their oversight of the accounting profession in the next decade. He also expressed hope that countries would respond to the firms' pleas for protection against catastrophic negligence claims by placing limits on their liability.
Mr Rake said such an environment could enable KPMG to transform itself into a single global partnership within 10 years. The firm currently has 93 member partnerships.
The creation of a single global partnership could provide large cost savings for a firm and its clients. Litigation arising out of the business scandals could help bring an end to the firms' existing structures.
Lawyers acting for aggrieved companies and investors are determined to overturn the firms' traditional stance that liability for audit failure should rest with just one member partnership.
KPMG's Dutch partnership certified the accounts of the Royal Dutch/Shell group, but lawyers seeking damages over its reserves scandal are preparing actions against the firm's US partnership.