KPMG partners vote to create limited liability company company


Partners' salaries and other financial details will be disclosed by the leading accountancy firm KPMG within three months as a result of its decision to create a limited company to carry out audits of publicly quoted and financially regulated clients.

The creation of KPMG Audit, which will be wholly owned by the partnership and capitalised at pounds 50m, was confirmed by Britain's second-largest accountancy practice yesterday - so ending months of press speculation. A vote of the firm's 600 partners had been overwhelmingly in favour of the proposal, senior partner Colin Sharman told a press conference at London's Savoy Hotel.

Under the new arrangements, the company and individual partners can be sued, but partners not connected with the work at issue will be protected by limited liability.

The company will have a turnover of about pounds 100m and expects to have 400 listed and 300 regulated clients plus their subsidiaries. Clients that do not fit into these categories of "public-interest" companies will continue to be audited by the partnership, with the 300 audit directors - currently partners - splitting their time between the two operations. Last year, audit business accounted for about pounds 200m of KPMG's total fee income of more than pounds 500m.

Mr Sharman defended partial incorporation against suggestions it might create confusion, saying the new structure would enable the practice to improve the management of listed and regulated company audit business and "provide a clear division between audit and non-audit services". Clients whose audits were not being transferred to the new company would receive the same standards of audit service as the others, he added.

KPMG Audit will start work on audits relating to financial years starting in 1996. But the firm intends to publish an annual report for the financial year to 30 September in January.

Mr Sharman and his colleagues have not yet decided which firm will audit the combined accounts of the partnership and the company, but concerns over possible conflicts of interest will probably rule out another member of the Big Six leading firms.

KPMG, which has been advised on the matter by Lazards and the City law firm Slaughter & May, is convinced that its decision to protect itself from spiralling law suits by incorporating marks a turning point in the development of professional firms. It also believes publishing full annual results will set a precedent its rivals might be compelled to follow. The company says clients have been attracted by the idea of knowing as much about their accountants as they do about most other suppliers.

Coopers & Lybrand, the country's largest, and Price Waterhouse are among the leading firms known to be examining the issue, though neither would be drawn on their plans. However, John Roques, senior partner of Touche Ross, confirmed his firm's opposition to limiting liability in this way. While pointing out that he and his colleagues would look at the issue carefully, he said he was concerned that the profession may be perceived as becoming a "low-cost, low-quality, low-responsibility and low-risk supplier".

Mr Sharman, who will chair the 10-strong board of the new company, said the move was "a bold step for the accountancy profession, but one that we believe is necessary to protect and develop our business and our people in the next decade".

He added that clients had been overwhelmingly in favour of it, and pointed to the endorsements of such well-known business figures as Sir Evelyn de Rothschild, chairman of NM Rothschild; NatWest Group chairman Lord Alexander and Cable & Wireless chairman Lord Young.

The firm stressed that the move did nothing to weaken its support for the campaign to reform the principle of joint and several liability, under which auditors can bear the total loss in a corporate collapse regardless of their degree of fault. A Law Commission feasibility study on this issue is expected by Christmas.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
ebooksA celebration of British elections
Arts and Entertainment
Billie Piper as Brona in Penny Dreadful
tvReview: It’s business as usual in Victorian London. Let’s hope that changes as we get further into the new series spoiler alert
Life and Style
A nurse tends to a recovering patient on a general ward at The Queen Elizabeth Hospital in Birmingham
Fans take a selfie with Ed Miliband in Kempston, near Bedford, on Tuesday
election 2015
Arts and Entertainment
No Offence
tvReview: No Offence has characters who are larger than life and yet somehow completely true to life at the same time spoiler alert
Chuck Norris pictured in 1996
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Project Manager / Business Analyst

£40-50k + Benefits.: Guru Careers: A Project Manager / Business Analyst is nee...

SThree: Trainee Recruitment Consultant - Swiss Banking and Finance

£20000 - £25000 per annum + Uncapped commission: SThree: Can you speak German,...

Ashdown Group: Marketing Executive - 6 month FTC - Central London

£25000 - £30000 per annum + benefits: Ashdown Group: An exciting opportunity f...

Ashdown Group: Junior Project Manager (website, web application) - Agile

£215 per day: Ashdown Group: Junior Project Manager (website, web application ...

Day In a Page

General Election 2015: Ed Miliband's unlikely journey from hapless geek to heart-throb

Miliband's unlikely journey from hapless geek to heart-throb

He was meant to be Labour's biggest handicap - but has become almost an asset
General Election 2015: A guide to the smaller parties, from the the National Health Action Party to the Church of the Militant Elvis Party

On the margins

From Militant Elvis to Women's Equality: a guide to the underdogs standing in the election
Amr Darrag: Ex-Muslim Brotherhood minister in exile still believes Egypt's military regime can be replaced with 'moderate' Islamic rule

'This is the battle of young Egypt for the future of our country'

Ex-Muslim Brotherhood minister Amr Darrag still believes the opposition can rid Egypt of its military regime and replace it with 'moderate' Islamic rule, he tells Robert Fisk
Why patients must rely less on doctors: Improving our own health is the 'blockbuster drug of the century'

Why patients must rely less on doctors

Improving our own health is the 'blockbuster drug of the century'
Sarah Lucas is the perfect artist to represent Britain at the Venice Biennale

Flesh in Venice

Sarah Lucas has filled the British pavilion at the Venice Biennale with slinky cats and casts of her female friends' private parts. It makes you proud to be a woman, says Karen Wright
11 best anti-ageing day creams

11 best anti-ageing day creams

Slow down the ageing process with one of these high-performance, hardworking anti-agers
Juventus 2 Real Madrid 1: Five things we learnt, including Iker Casillas is past it and Carlos Tevez remains effective

Juventus vs Real Madrid

Five things we learnt from the Italian's Champions League first leg win over the Spanish giants
Ashes 2015: Test series looks a lost cause for England... whoever takes over as ECB director of cricket

Ashes series looks a lost cause for England...

Whoever takes over as ECB director of cricket, says Stephen Brenkley
Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power