KPMG partners saw their pay soar again for the financial year ended 30 September 2022, while the firm delivered a second year of growth, despite the spectre of the record £14.4m fine over the audit of Carillion still tarnishing the firm’s reputation.
The Big Four firm’s annual results for last year, which was published today, reported revenue growth of £2.35bn last year to £2.72bn, and profit before tax increasing from £436m to £449m.
The strong annual results was driven by the firm’s consulting practice, which brought in £811m, up 22% on the previous year, and the ongoing demand in M&A across the sector added £443m, which is an increase of 24% on the prior year.
The firm also reported a 13% growth to £455m in its tax and legal division and despite being marred by big fines, the audit practice also saw growth of 10% to £695m.
Bumper pay day
Because of strong results KPMG’s 786 partners enjoyed a bumper pay packet, but its partner reward is still bottom of the pack and behind its Big Four cohorts.
PwC’s partners were paid on average over £1m, but the firm warned that high inflation meant that the purse strings would be cut next year. EY confirmed in November that partner pay increased from £749,000 in the 20/21 financial year to £803,000. Deloitte’s partner pay was £1,058,000 in the year ended 31 May 2022.
Meanwhile, KPMG’s chair Bina Mehta received a total remuneration of £1.292m, while chief executive Jon Holt topped the pay scale with a total remuneration of £2.72m.
The annual results noted that the firm has also handed out a bonus pot of more than £105m to employees.
Holt said: “We have delivered another year of strong performance thanks to the hard work and dedication of our people. Our three-year strategy, focused on investing for the long term, is delivering. We’re growing in a way that enables us to invest for the future, meet client demand, strengthen our multi-disciplinary services and recognise our people.
Overshadowed by audit fines
The double-digit growth goes some way to try to change the narrative of KPMG’s 2022, which had been overshadowed by large audit fines.
The biggest fine came from the high-profile five-week tribunal into the collapse of Carillion which heard how KPMG auditors falsified documents. The Big Four firm ended up paying a £14.4m fine and seeing four of the senior managers involved with the audit banned.
KPMG was also pulled up for its audits of Conviviality, Rolls-Royce, Kier, Revolution Bars and Silentnight. The combined total of these four fines was £23.05m pre-discount fines.
KPMG ended up topping the Financial Reporting Council’s (FRC) annual enforcement review, which listed the financial sanctions and cases in 2021/22. The total fines assigned to KPMG accounted for almost half of the £46.5m fines dished out by the accountancy watchdog.
Diversity and pay
In 2021, KPMG publicly pledged to close the socio-economic gap within the firm, so it’s not surprising that this is one of the figures in the report.
Measured by parental occupation, the firm has reported in its annual results that 22% of KPMG UK’s board are from a lower socio-economic background, while 21% of the firm’s 16,036 employees are from this background.
As part of this drive to lower the barriers of entry, KPMG has published a “progression gap” study, which analysed 16,500 partners and employees at the firm over a five-year period and found that it took 19% longer for individuals from lower socio-economic backgrounds to be promoted compared to those from higher socio-economic backgrounds.
Measuring other diversity characteristics, the firm reported that 55% of its executive committee is female, and 22% of the board are from an ethnic minority background.