Management Accounting Issues At KPMG: Analysis And Solutions

Minutes of 1st meeting

For gaining significant knowledge about management accounting issues and strategies for mitigation, four articles were selected from credible sources by our group. Each member stated their own views about their respective articles i,e. (Ft.com. 2018). Then the next meeting was performed for analysing the articles of each other to select the best one.

After reading some other articles like (StockNews.com. 2018), each member tried to make a discussion to identify the appropriate article. Each member shared his own thoughts based on the articles of other members. Based on such analysis, the next meeting had been decided for selecting the best one.

Lastly after making several discussions and reviewing each other articles, the present article had been selected due to its appropriateness compared to others and i.e. (Marriage, 2018). In addition, this article has depicted the critical issue of management accounting which other articles failed to illustrate. Additionally, rest of the three articles were not selected from an appropriate source which failed its appropriateness for this assignment as well.

KMPG is one of the Big Four as well as professional service companies along with Deloitte, Price waterhouse Coopers and Ernst & Young. It is positioned in Amstelveen and Netherlands with total strength of more than 207, 050 people. It has three lines of service like advisory, financial audit, and tax. Based on the article, ‘KPMG UK revenues rise at the fastest rate for a decade despite audit criticism’ published in Financial Times by Madison Marriage, it has been analyzed that the revenue of the company is rapidly rising despite of its crushed reputation due to the management accounting issue. The potential strengths that have been identified in the article are the profits before tax as well as shareholder bonuses that rose by 35 % (Marriage, 2018). In addition, the results based on their revenue were also quite significant to consider as its strength as it assisted the company to generate huge sales as illustrated in Fig: 1.

Fig: 1 (Increasing sales of KPMG)

Source: (The Financial Times)

Moreover the article has provided evidence about the financial growth of the company that reflects its strength explicitly. It has been also analysed that the company KPMG has attained growth in sales and revenue by 8% despite of its lack of reputation in the market. In addition, the figure that has been illustrated in the article based on its earnings per share also depicted a growth in the financial performance of the firm (Marriage, 2018). The criticism about the firm that has been identified in the article based on the loss of audit clients as well as the issue of Gupta family highly validated the management accounting issue of the firm. However, it has been well illustrated in the article that there is a significant opportunity to enhance the auditing processes of the company in order to retain its clients as well as to enhance their reputation in the market. The investigation of UK accounting regulators as depicted in the article also reflects the weakness of the firm that is one of the prime factors that resulted in the management accounting issue.

Minutes of 2nd meeting

On the other hand, it has been also analyzed from the article that the weaknesses would be critical for the firm’s success in long-term. The article also highly depicted that the weaknesses of the firm would get increased due to the increasing provisions of fines imposed over the firm due to the quality of audit. It has increased from £56m to £73m in the past twelve months (Marriage, 2018). One of the major weaknesses that have been identified in the article are the ability of the firm to enhance their management accounting issue based on the quality of audit that resulted in the loss of potential clients along with criticisms from the regulators and politicians. That resulted in loss of the firm in the current scenario. Furthermore, the investigations of KMPG’s work on audit by the UK accounting regulator is also a potential threat to the company as it would result in a bad reputation and it would increase the interferences in business operations. On the other hand, the scandal in the US about the regulatory inspections also created a significant threat for the company to operate in the market and stay ahead in the competition.

Being the consultant, the courses of action that needs to be integrated by the management in order to tackle the issues identified evidently in the article is to enhance the quality of audits so as resolve the management accounting issues explicitly. Firstly the firm also needs to enhance its computerized system for accumulating information over expenses and revenues of its major clients so as to improve its sustainable condition. Such accounting programs would highly assist the owner and managers of the firm to deliver effective service to the clients that would enhance the performance of the firm in the market as well as audit report. On the other hand, the investigation of UK accounting regulators would be mitigated through the integration of cost accounting software in order to create complex analysis. This would help to expand the capabilities of the firm reducing the interference of political and regulatory bodies as such analysis would also enhance the business performance and audit process of the firm. The issue of increasing fines would adversely affect its revenue and profit. Hence, it would require an effective analysis of the work-flow problem associated with audit so as to present proper information to the clients. Such initiation would highly assist the company to gain potential clients form the market as well as enhance its revenue at an elevated level.

In addition, the quality of the audit process needs to be enhanced with the engagement of employees in order to deliver adequate services. As KMPG had a significant issue based on the quality of audit for clients, so it is highly recommended to hire qualified employees or train existing employees for managing the accounting department in order to deliver quality services to the clients and reduce political and regulatory barriers. These procedures would certainly assist KMPG to resolve its management accounting issues associated with poor quality of audit affecting its clients in the market. The threats and weaknesses that had been identified would be significantly mitigated through the proposed course of action. The strengths of having good financial performance would assist to implement the course of action to enhance the reputation and reduce the level of investigations explicitly. Furthermore, the clients that had been lost by the firm KMPG would be certainly attained with the proposed course of action as it would ensure the quality of audit as well as offer quality service to the clients. Hence, the research article about KMPG is a significant illustration of management accounting issue based on poor quality of audits for the clients. This in turn created a bad reputation of the company in the market as well as resulted in loss of potential clients. The proposed course of actions would highly assist the company to mitigate each weaknesses and threats raised in the article evidently. In addition, it would also assist to gain competitive edge and clients from the market.

References

Marriage, M. (2018). KPMG UK revenues rise at fastest rate for decade despite audit criticism | Financial Times. [online] Ft.com. Available at: https://www.ft.com/content/293bc9b2-f864-11e8-af46-2022a0b02a6c [Accessed 27 Dec. 2018].