KPMG's Strategic Growth Shakes Up the Big Four

At Legal & General’s annual meeting in May 2022, a frustrated shareholder famously asked, “Don’t we deserve auditors of the very highest reputation?” The applause underscored KPMG’s predicament years of audit failings, regulatory fines, and reputation hits had taken a toll. Fast forward to today, under CEO Jon Holt’s leadership, KPMG UK is on the road to redemption, proving that resilience and strategic action can rewrite narratives. This turnaround isn’t confined to the UK. Globally, KPMG has surged ahead, outpacing its Big Four rivals Deloitte, EY, and PwC—in growth during FY24. Let’s dive into what worked for KPMG and how private equity has fueled its remarkable resurgence, especially in the U.S.

Building on Core Strengths

KPMG’s impressive FY24 results were driven by its bread-and-butter offerings: tax and audit. The firm reported a 6.2% growth in audit revenues ($13.4 billion) and a 9.6% rise in tax revenues ($8.7 billion), outpacing its rivals. These results didn’t happen by chance. KPMG invested heavily in AI-powered audit tools and advanced analytics, making audits faster, more accurate, and transparent. This technological edge has allowed the firm to adapt to client demands in a rapidly changing regulatory landscape.

In tax, KPMG’s expertise in global compliance and strategic planning has made it the go-to advisor for businesses navigating complex reforms. This dual focus on tax and audit solidified its reputation as a trusted partner, driving growth even in uncertain economic times.

Learning from Past Mistakes

The 2022 exam cheating scandal, which led to a $25 million PCAOB fine for KPMG Netherlands, was a turning point. Rather than brushing it under the rug, KPMG launched a firm-wide culture reboot. Jon Holt spearheaded efforts to reinforce ethical practices, transparency, and accountability at every level. These measures didn’t just repair KPMG’s reputation; they reinvigorated its workforce and reassured clients of its commitment to integrity.

However, ethical challenges weren’t KPMG’s only hurdles. KPMG’s growth varied regionally. While the Americas saw a 4.2% revenue increase, driven by strategic hiring and performance reviews, Asia-Pacific growth was just 0.5%, impacted by China’s economic slowdown and political challenges in Australia. These regional disparities highlight the need for KPMG’s targeted strategies to navigate complex global markets. This wasn’t an isolated issue. PCAOB Chair Erica Williams described such scandals as a “global issue,” highlighting the need for cultural change across the accounting profession. KPMG’s proactive reforms not only addressed its internal shortcomings but also positioned the firm as a leader in ethical transformation within the industry.

Fueling Innovation and Expansion

One of KPMG’s most strategic moves in the U.S. has been leveraging private equity (PE) funding to modernize and expand. This influx of capital has enabled the firm to:

• Expand Service Lines: Strengthen offerings in emerging areas like environmental, social, and governance (ESG) and cybersecurity.
• Attract Top Talent: Competitive compensation and cutting-edge work have helped KPMG remain a desirable employer amid a talent shortage.
• Modernize Processes: Investments in advanced technologies, including AI and automation, have streamlined operations and enhanced client service.

PE funding also allowed KPMG to pursue targeted acquisitions that bolstered its capabilities in high-growth areas. These strategic moves ensured that KPMG stayed ahead in a competitive and evolving accounting landscape.

Addressing the Talent Crunch

The accounting profession is grappling with a talent shortage, as U.S. accounting undergraduates have hit a 15-year low, and the number of CPA exam takers has plummeted. KPMG’s U.S. Chief Paul Knopp has proposed a groundbreaking solution: replacing the traditional fifth year of education with an apprenticeship model. This change could make CPA certification more accessible and attract a new generation to the profession.

Knopp described the issue as a “brewing crisis”, emphasizing that the industry’s systemic importance to capital markets makes resolving the shortage critical. By advocating for reform and implementing innovative recruitment strategies, KPMG positions itself as a leader in addressing one of the profession’s biggest challenges.

From Survival to Leadership

KPMG’s journey from redemption to resurgence is a masterclass in strategic growth and resilience. By strengthening its core offerings, embracing private equity funding, and prioritizing ethical leadership, the firm has redefined its place in the Big Four. The turnaround isn’t just about bouncing back—it’s about setting a new standard for excellence in accounting. As KPMG continues to navigate the complexities of the accounting world, it’s clear that the firm is charting a path forward with purpose and precision. From cutting-edge audits to progressive talent solutions, KPMG’s growth story is far from over and this time, they’re leading by example. Stay updated with more insights and subscribe to our weekly newsletter for the latest trends!