Embedding Quality and Continuous Improvement throughout the Audit

Quality Management System

From the top-down to the bottom-up, quality is embedded in everything we do, and as the National Managing Partner of our Audit Quality and Professional Practice, I consistently emphasize the importance of a continuous improvement mindset throughout our organization that asks, “How can we conduct a better, higher quality audit?”

Our practice never stops investing in technology; learning and development; diversity, equity and inclusion, and new capabilities. Our investments are informed by strategies around more efficient but comprehensive auditing – strategies that drive quality. These investments are also informed by our evolving Quality Management System and our robust root cause analysis program.

Other articles in our new Audit Quality Report detail many of the exciting initiatives we have that are driving quality here and now. These efforts are led by the amazing people in our Department of Professional Practice (DPP), Audit Quality Support Network, Risk Management - Inspections Group, SEC Reviewing Partner program, and more. These groups work together to enhance our overall Quality Management System.

Today, however, I want to focus on three distinct and new ways we are driving quality at the individual, engagement team, and national levels.

1.      For individuals, KPMG Clara, our global smart audit platform, brings everything together for a more seamless, integrated audit experience with on-demand learning that helps auditors make and document those decisions that are all aligned to the latest accounting standards.

Importantly, KPMG Clara is not static. We are infusing it with more and more capabilities, including analytics, which help refine our risk assessment and targeted response.

We are introducing routines that will fundamentally change the way we audit revenue and operating expenses using data and analytics (D&A) capabilities that will provide sufficient audit evidence and have the potential to deliver more insight into the transactions. Our auditors are building custom analytics and leveraging prebuilt dashboard templates to analyze key accounts like revenue; inventory; accounts receivable and payable; and property, plant and equipment, enabling our people to narrow our evaluation of the magnitude of the risk and target our response accordingly.

Over the past two years, every auditor had the opportunity to join us at KPMG Lakehouse to learn and apply a new cross-industry Operating Expense analytics solution as well as automated industry routines. We are continuing that work in 2023 through our Live@Lakehouse learning and development series. These hands-on experiences rapidly upskill our auditors to consistently leverage new D&A capabilities across our audits. In fact, these industry-specific routines are now deployed on more than half of our public audits. These technologies, along with KPMG Clara Advanced Capabilities, merge our D&A solutions with our methodology to drive audit quality.

2.      For engagement teams, we continue to modernize a standardized and integrated approach to engagement strategy, planning, and project management.

As our Vice Chair – Audit Scott Flynn articulated, our audit plans are pulling work forward within a process that standardizes, centralizes, and automates key parts of the audit. We’ve invested in enhanced project management tools to enable teams to deliver a quality audit and generate more precise data to enhance our monitoring and remediation efforts.

We track this work, alerting teams to progress on 12 key metrics every month for all 700+ of our public audits we do. These metrics include resourcing, progress, partner reviews, and more. In total, progress for last year’s teams was scored on 100,000 data points.

This data improves the ability of the engagement team, business unit, and national leadership to take real-time preemptive actions to mitigate any challenges within the audit. Importantly, this data facilitates a transparent and iterative collaboration between engagement and monitoring teams that improves audit execution. 

3.      At the national level, all this work is enabling – for the first time in our practice’s history – pre-issuance reviews for 100% of our public company integrated audits. 

Pre-issuance reviews are part of our monitoring procedures and our internal inspection program where a group of highly skilled professionals reviews our in-process audits. This helps us:

• Prevent potential issues, responding during the current audit cycle.
• Support root cause analysis across our portfolio to continue speeding up mitigation efforts.

As I stated above, these efforts are driven by the nearly 300 people in DPP, including 145 partners and managing directors, along with leaders in our Risk Management - Inspections Group and in our SEC Reviewing Partner program. That said, they are supported and made possible by all ~10,000 of our Audit partners and professionals, who are committed to enhancing the quality they deliver to their clients and to the capital markets.

These are just a few areas where we’ve made significant strides over the past year. I look forward to sharing more on our collective efforts to sustainably enhance audit quality in future articles.