KPMG posted record annual revenues but its profit in the United Kingdom fell sharply as it invested heavily in an audit practice that has suffered a series of blows to its reputation.
In fiscal 2019, the Big Four accounting firm’s revenues grew 6.2% to $28.96 billion, beating last year’s record of $28.96 billion. Growth was across regions, with Asia Pacific leading the way with a 9.3% increase, followed by the Americas (6.6.%) and Europe, Middle East and Africa (4.7%).
“We are pleased to have achieved strong growth during an important transitional year for KPMG as we focus on making significant investments as part of our multi-year collective strategy implementation,” CEO Bill Thomas said in a news release.
KPMG’s U.K. revenues grew 3% to $3.2 billion, but profit declined 14% to $474.6 million, indicating the continuing toll of the problems in the firm’s audit practice.
“The decline in profits follows a series of reputational setbacks for KPMG over the past two years,” The Financial Times said. “It has faced fierce criticism from politicians and regulators over the quality of its audits and a string of controversial partner exits.”
The U.K. audit watchdog, the Financial Reporting Council, has launched investigations into KPMG’s work for collapsed construction giant Carillion and Conviviality, the failed drinks supplier.
KPMG has invested $60 million in revamping its audit practice, which included hiring 700 qualified auditors, recruiting a record 1,900 graduates and spending $30.6 million on training at its new “KPMG audit university.”
Thomas alluded to the problems in his annual note to shareholders, saying, “2019 has not been without challenges. We have faced reputational issues in a few of our member firms and took action, immediately, as appropriate, to these.”
Audit practice revenues rose 3.7% in 2019 to $11.1 billion globally and 10% in the U.K.
“We expect 2020 to be a better year,” KPMG UK Chairman Bill Michael said. “We’ve made some tough decisions in the last year including the audit investment, reshaping the cost base and taking a hit to consulting revenues by pitching for some big global audits.”