KPMG has been in the headlines during 2023 for their audits of all major banking crisis banks. According to FT.com, KPMG earns 14% of their public company audit fees from publicly traded banks. PwC earns 8%, Ey earns 3% and Deloitte earns 2%.
Silicon Valley Bank – According to Silicon Valley Bank’s latest proxy statement, KPMG has audited the company since 1994. KPMG earned audit fee revenue of $12.5 million in 2022 and $12 million in 2021
First Republic Bank – KPMG audited First Republic Bank since 2010. They also audit the predecessor entity since 2007. Kpmg earned $6.5 million in fees from First Republic Bank in 2021 and $6 million in fees in 2020.
Regulators have questioned whether their should be more regulations around financial disclosures for banks. They’ve also questioned whether KPMG properly assessed risks that these banks faced. One big risk is that these companies loaned out money at low interest rates while the federal reserve is raising interest rates rapidly. In that environment, depositors have been moving their money out of banks at a rapid pace. This raises solvency issues for small banks.
There are potentially more banking failures coming in 2023. Will KPMG also be auditors of those companies? We will have to wait and see.
Other regional banks that are being questioned that KPMG audits
Pacwest Bancorp – Kpmg signed off on their audit and is ratified as their auditors again 2023. KPMG only earned 2.7 million from Pacwest bancorp for their latest audit.
KPMG is the auditor of Accenture. Accenture has a market capitalization of $123 billion. KPMG won the audit in 2002. Accenture is the former consulting arm of Arthur Andersen. They broke off after the Enron Scandal. If you can’t get into the big 4, Accenture would be a good alternative as they are a large consulting firm.
You can see the fees that Accenture has paid to KPMG over the past couple of years in the table below. As you can see that KPMG was able to increase fees by about 10% year-over-year.