Governance

KPMG is the brand under which the member firms of KPMG International Limited (‘KPMG International’) operate and provide professional services. KPMG's member firms and affiliates operating in the Chinese Mainland, Hong Kong SAR and Macau SAR work together on a collaborative basis, subject to local applicable laws, and together are referred to as ‘KPMG China,’ the ‘firm’ or ‘we’ throughout this report, unless otherwise specified.

KPMG China is not a legal entity and does not hold share capital or have shareholders. The legal entities operating under KPMG China include KPMG (a Hong Kong SAR partnership), KPMG (a Macau SAR partnership), KPMG Advisory (Hong Kong) Limited, KPMG Huazhen LLP, and KPMG Advisory (China) Limited, each of which is a legally distinct and separate entity and describes itself as such. Each KPMG member firm is responsible for its own obligations and liabilities.

At KPMG China, governance is upheld by the Board and the Executive Committee. The Board, serving as the principal governance and oversight body, comprises elected partners from diverse business sectors and holds the primary responsibility for overseeing and advising on the firm’s strategic direction and related matters. Meanwhile, the Executive Committee, composed primarily of partners leading our four key regions and core business functions in China, acts as the core management body of the firm to ensure the effective implementation of the Board's strategies. Together, they work closely to drive the long-term development of the firm.

Our Board comprises partners with expertise in ESG-related domains such as energy and natural resources, complementing their professional qualifications and industry knowledge in relevant fields. Crucial ESG-related knowledge enriches the Board’s discussion and business domains. Moreover, members of both the Board and the Executive Committee hold significant positions within the firm and actively engage in external roles and activities, such as industry associations, professional bodies and non-profit organisations.

In FY21, the Our Impact Plan (OIP) governance structure was established at KPMG China. As part of this structure, the OIP department was formed to smoothly plan and implement OIP strategies.

The OIP department, under the Corporate Affairs function overseen by Tracy Yang, is led by Wilson Pang as the Head of OIP and is responsible for driving the implementation of KPMG China's OIP strategies. The OIP team reports regularly to the Executive Committee and also works closely with our four OIP pillar leads, relevant departments and other key stakeholders to drive and fulfil our ESG commitments. Each OIP pillar leads focuses on driving strategic actions related to their corresponding focus areas, such as anti-corruption, inclusion, diversity and equity (IDE), decarbonisation, and community engagement.

In recent years, the OIP team has actively promoted the implementation of ESG strategies across the firm, while our client-facing ESG service team focuses on providing diversified services to empower clients’ ESG governance, assurance, strategies, transformation, implementation and other diversified service area. The joint efforts of the two teams are not just about strategy setting or branding, but also about putting words into actions to achieve KPMG China’s ESG commitments and deliver a positive impact for our clients and stakeholders.

In times of change, our Purpose and Values are the beacons that guide our path, ensuring we always perform our work to the highest standards. KPMG China is always striving to become the most trusted and trustworthy professional services firm. We cultivate strong bonds with our clients and stakeholders through trust and our commitment to providing excellent services.

When we face a challenge, we uphold our Values, giving us the strength to move forward, navigate the complex and ever-changing environment, and drive innovation. It is these beliefs, which are deeply rooted in our corporate culture, that lead us to achieve breakthroughs, create lasting value and impact, and bring about positive changes to our clients, people, and society as a whole.

At KPMG China, we take a rigorous approach to the Enterprise Risk Management (ERM) process, which enables us to identify the top risks that may impact the achievement of the firm’s strategic objectives. Our Executive Committee, as the owner of the ERM process, leads and implements ERM to identify and manage the top risks, while the Board provides oversight and monitors the robustness of the ERM process. In this way, the Executive Committee and the Board can acquire the information they need to best determine if, and to what extent, firm resources should be reallocated, and strategy reassessed.

A consistent ERM approach is also adopted for Functional Risk Profiling conducted in Audit, Tax and Advisory, which helps functional leadership identify the top risks that affect the achievement of their strategic objectives and business plans. This process includes the development and implementation of action plans to address the top risks identified at the functional level, as well as the identification of any risks that should be aggregated to the firmwide level. Sector-focused Risk Profiling has also been initiated using a tailored ERM approach, with the aim of identifying sector-specific critical risks.

All of our functions and people at KPMG China are obliged to identify, assess and manage risks, as well as to ensure the quality of our work. To drive consistency and accountability, we have established a central team (the ‘Central Team’) that is composed of dedicated professionals who have been assigned key responsibility for overseeing and promoting a culture of quality and integrity across the firm. The Central Team is led by the Head of Quality and Risk Management, who reviews and enforces compliance through policies and procedures related to professional risk management, ethics and independence, quality control, and compliance.

The Central Team also considers the impact of key findings from integrated quality monitoring and compliance programmes, as well as the adequacy of recommended remedial actions. In addition, the Central Team offers continuous guidance related to quality monitoring/compliance, regulatory inspection liaison, information protection and data privacy, contracting, ethics and independence, client and engagement acceptance, and general quality and risk management. The Central Team develops policies and guidelines that enable KPMG professionals to assess the risk level of a client or an engagement before accepting business engagements or relationships, while also supporting our daily operations and enabling the business to manage risks proactively.

At KPMG China, we are committed to achieving excellence in audit quality. Throughout 2024, we continued to comply with the requirements set by the 20th National Congress of the Communist Party of China (CPC), the Two Sessions, and the Central Economic Work Conference. We have made steady progress in enforcing the requirements outlined in the General Office of the State Council's ‘Opinion on Strengthening Regulation, Preventing Risks, and Promoting High-Quality Development of the Capital Market, as well as the Opinions on Strengthening Financial Accounting Supervision and Enhancing the Quality of Accounting Information’. In line with these directives, KPMG China strictly adheres to the requirements set by regulatory authorities for financial statements audit and firm audit quality. We are committed to meeting our responsibility as the ‘gatekeeper’ of the market, and we focus on enhancing audit quality as our core objective, with the aim of serving the development of the national economy.

We consistently assess and refine our audit processes, methodologies, and quality management systems to ensure our work meets both KPMG’s standards and industry expectations. Over the past year, we have made continuous efforts to strengthen the consistency and robustness of our internal quality management system. This includes the implementation of a System of Quality Management (SoQM) that complies with International Standard on Quality Management (ISQM) No. 1 and 2, the Quality Management Standards for Accounting Firms (No. 5101 and No. 5102), as well as KPMG’s global network requirements. Based on the annual evaluation of the firm’s quality management system as of 30 September 2024, we are confident that it effectively supports the achievement of its objectives.

In the realm of technology and digital transformation, we continue to advance the digitalisation of audits, with a focus on improving employees’ technological skills. We are also investing in digital infrastructure, such as information systems and cybersecurity. Our audit methodologies and workflows, including KPMG Clara, our smart audit platform, are constantly evolving. These efforts not only increase the efficiency and transparency of our audits but also further reinforce our ability to deliver high-quality services. We have also released ‘2024 KPMG Huazhen Audit Quality Report’, which outlined the actions and investments we are implementing to promote audit quality.

KPMG China’s tax services are guided by the firm’s Values, and governed by the Principles for a Responsible Tax Practice and the Global Quality Framework. Driven by our Purpose to inspire confidence and empower change, we are committed to delivering customised, comprehensive and high-quality tax services to a range of enterprises and governmental authorities. When liaising with tax authorities and clients, our staff are required at all times to act with integrity and in compliance with relevant legal, regulatory and professional requirements.

In 2024, the KPMG Responsible Tax Programme reached its tenth anniversary, which served as a convener to bring together different stakeholders to discuss complex issues, exchange ideas and find improved solutions, covering emerging issues such as climate change and AI. Taxation affects every aspect of our lives, from personal to societal and from global macroeconomics to individual households. Moving forward, we will continue to bring together diverse stakeholders to foster informed dialogue and discussion.

At KPMG China, we treat integrity and accountability as lifelines of professional services. By translating these principles into concrete actions, we safeguard KPMG China's professional standing and foster lasting trust with clients and partners. We are committed at all times to acting lawfully, ethically and in the public interest and working against corruption in all its forms.

At KPMG China, we uphold the highest ethical standards and have zero tolerance for bribery and corruption in any form. We have enacted our Code of Conduct and comprehensive anti-bribery and corruption requirements to ensure that the highest standards of integrity are maintained across the firm.

Every year, all partners and staff are required to complete the ‘We Do What is Right: Integrity at KPMG’ mandatory training course to enhance their understanding of anti-bribery laws and regulations and our firmwide policies, and maintain transparency and compliance in the business activities. We also periodically remind our people of our strict requirements and reporting procedures regarding the gifts and entertainment. These stringent approval processes and reporting mechanisms are designed to prevent potential conflicts of interest, ensuring KPMG Values are consistently upheld. 

At KPMG China, we respect human rights and continuously monitor and evaluate our operational processes to ensure they align with legal requirements and our human rights commitment. The firm not only strictly abides by our human rights commitment in our own business operations, but also pays close attention to the behaviour of our suppliers, business partners and clients to promptly assess whether they can fulfil the same commitment and responsibilities. As stipulated in the Code of Conduct, we do not tolerate behaviour that is illegal or unethical or that otherwise breaches human rights standards, whether by KPMG people or by clients, suppliers or stakeholders with whom we have working relationships.