KPMG US Announces Formation of Independent Audit Quality Advisory Committee to Build on the Success of Quality Initiatives

• The Independent Audit Quality Advisory Committee's (IAQAC) formation is the next step in the firm's strategy to continue leading on delivering audit quality

• The new committee brings together audit and accounting leaders with experience from the SEC, PCAOB, AICPA, COSO and the IFRS Foundation

• The committee will provide an independent and informed perspective on matters related to audit quality, complementing the governance of the firm's Board of Directors, which includes three independent members

New York, New York--(Newsfile Corp. - August 28, 2024) - Today, KPMG LLP, the US audit, tax and advisory firm, announced the formation of an Independent Audit Quality Advisory Committee (IAQAC), building on significant actions in recent years to lead on audit quality.

"Our audit transformation has delivered incredibly positive results and empowered our auditors to deliver high quality audits during a time of compounding market risks," said Paul Knopp, KPMG US Chair and CEO. "This committee will provide an informed and independent perspective as we continue to transform the audit to best protect the capital markets."

In 2019, KPMG embarked upon a journey of transformational change to drive significant continuous improvements in audit quality. As we move forward, the IAQAC will be responsible for advising KPMG on matters underpinning our commitment to audit quality. These include the firm's efforts to meet new quality standards from regulatory bodies and respond to PCAOB inspections, including root cause analysis, and the design, development, implementation and measurement of strategic audit quality initiatives.

In recent years, KPMG has deployed new data analytics and artificial intelligence (AI) capabilities that will enable engagements to seamlessly extract and analyze tens of thousands of transactions to refine the audit. The committee will advise on how the firm continues to deploy these Trusted AI capabilities into our audits.

In addition to the firm's Board of Directors, which includes three independent members, the IAQAC will provide perspectives and insights. The IAQAC operates in a strictly advisory capacity, and committee members have no voting, decision-making or similar rights.

"We are proud to bring together an incredible mix of highly talented audit and accounting leaders," added Knopp. "These leaders have tackled pivotal matters facing the audit profession in their involvement with the SEC, PCAOB, AICPA, COSO, the IFRS Foundation and more."

Members of the IAQAC include:

• Zoe-Vonna Palmrose is the Accounting Circle Professor Emerita of Accounting at the University of Southern California. Palmrose formerly served as Deputy Chief Accountant for Professional Practice at the SEC, where she played a pivotal role as part of the SOX 404 Team. Palmrose also served as an SEC observer on the US Department of the Treasury Advisory Committee on the Auditing Profession and on the PCAOB Standing Advisory Group.

• Doug Prawitt is the LeRay McAllister/Deloitte Foundation Distinguished Professor and Director of the School of Accountancy at Brigham Young University. He is also the Lead Director on COSO's Executive Board and played a key role in producing COSO's ERM Framework, as well as its most recent Internal Control Integrated Framework. Prior to these roles, Prawitt served a three-year term as a member of the AICPA Auditing Standards Board.

• Larry A. Leva was most recently the Vice Chair of the Board of Trustees of the IFRS Foundation, where he oversaw the development of globally accepted accounting and sustainability disclosure standards. Prior to that role, he was the former KPMG Global Vice Chairman for Quality, Risk and Regulatory after serving in leadership roles at the US firm, including on the firm's Management Committee, Board of Directors and as an SEC Reviewing Partner.

The formation of the IAQAC is the next step in KPMG's ongoing audit transformation to deliver audit committees, management teams and our professionals a better audit experience. Actions in recent years include, but are not limited to:

• Leading the profession in deploying Trusted AI into the audit, including embedding an AI assistant directly into KPMG Clara: Over the past 18 months, the firm has quickly and responsibly deployed generative AI capabilities to our audit practice, including voice-to-text, flowcharting, contract analyzers and more. In July, we announced the integration of AI capabilities directly into KPMG Clara, our global smart audit platform.

• Enhancing leadership accountability to accelerate audit work earlier in the cycle: In recent years, KPMG introduced compensation clawbacks for Partners tied to pulling work forward in the audit. This accountability is paired with new resources to support meeting audit milestones. The result: the firm has moved significant work out of our traditional busy season, improving our ability to focus on areas of highest risk with reduced time pressure.

• Revamping and enhancing our internal quality inspections process: As KPMG has pulled work forward in the audit cycle, we have also expanded the scope of our internal reviews and conduct those reviews before a company's reporting period ends. Today, KPMG conducts pre-issuance reviews of 100% of public company audits.

• Strengthening our firm-wide system of quality control: Even prior to the International Auditing and Assurance Standards Board's (IAASB) International Standard on Quality Management (ISQM) 1, the firm documented and tested controls that form our system of quality control as part of a firm-wide focused effort to enhance audit quality. KPMG has also required leadership certifications of our system of quality control for several years.

• Staying ahead of fraud: In collaboration with KPMG International, audit engagement teams are engaging a new group of forensic specialists to better identify and test for fraud risks as part of fiscal year 2024 audits.

To learn more about KPMG or our commitment to audit quality, visit www.kpmg.com or kpmg.com/audit-quality.

About KPMG LLP

KPMG LLP is the U.S. firm of the KPMG global organization of independent professional services firms providing audit, tax and advisory services. The KPMG global organization operates in 143 countries and territories and has more than 273,000 people working in member firms around the world. Each KPMG firm is a legally distinct and separate entity and describes itself as such. KPMG International Limited is a private English company limited by guarantee. KPMG International Limited and its related entities do not provide services to clients.

KPMG is widely recognized for being a great place to work and build a career. Our people share a sense of purpose in the work we do, and a strong commitment to community service, inclusion and diversity and eradicating childhood illiteracy. Learn more at www.kpmg.com/us.

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