Audit quality

At the centre of our Global Quality Framework is continuous improvement. Our Single Quality Plan (SQP) is at the heart of this – we use it to drive measurable improvements in critical areas. It is designed to be agile to ensure that, over the course of the year, we have a clear but dynamic approach to prioritisation.

Single Quality Plan (SQP)

Our SQP supports us in evaluating information from a range of data points including our Emerging Issues process, inspection and review findings, Second Line of Defence themes, root cause analysis reporting, the Annual Risk Review, and executive meetings such as the Quality Council and Audit Executive.

We regularly assess what topics have escalated in priority or have been resolved and we track these movements on our dynamic heat map. The heat map helps us identify and keep focus on both our priority and foundational programmes. The status of these programmes can change throughout the year as we evaluate the effectiveness of actions taken using a range of specific and focused KPIs to measure success.

Priority programmes

Our priority programmes at the start of the year were:

• Root cause analysis (improving the quality and timeliness of our root cause and remediation processes).
• Engagement analytics (using data obtained through KCw to monitor the progress of our audits with the aim of accelerating work).
• Impairment (improving the consistency of audit work execution for impairment of non-financial assets).
• Close the loop (a programme focused on minimising the instances of an audit file not fully reflecting the intentions of a technical consultation or hot review comments).
• Laws and Regulations (reducing execution risk and supporting our teams in evaluating how breaches of laws & regulations should be addressed in the audit).
• Risk assessment (driving consistency in risk assessment and ensuring that our audit files clearly evidence and articulate good rationale to underpin decisions made).
• Simplification (challenging our audit processes to continue driving consistency and ensuring a positive experience in delivery for our auditors).

During the year, the Impairment, Close the Loop and Laws and Regulations programmes were transitioned to business-as-usual activities. While these areas are now embedded within standard processes, they continue to be monitored closely to identify any instances of issue recurrence. Within the Root Cause Analysis programme, our SQP focus has shifted towards remediation, with efforts concentrated on enhancing the effectiveness of remedial actions.

Foundational programmes

Our foundational programmes, which we expect to be an enduring focus as they support our ability to deliver sustainable audit quality, are:

• Culture programme initiatives (focused on embedding our culture of High Challenge, High Support consistently across the business).
• Training programme (focusing on delivering effective training that provides our people with the skills they need for both today’s and future audits).
• Technology adoption (targeted at ensuring high-quality and consistent adoption and application of both existing and new technology products).

Measuring our progress

Each month we assess our progress through a combination of progress and effectiveness KPIs which are a blend of qualitative and quantitative measures, linked to the objectives of each programme. As these measures can fluctuate during the year, we look for trends and evidence that the measures we are taking are effective. This continues to be key in ensuring we have an effective response to audit quality related issues.

Remediation – improving our root cause process

Over the past few years, we have invested in our root cause team to ensure that we learn from the findings of both internal and external reviews, have robust processes to embed best practices, and have appropriate actions plans developed to address learnings. In the current year, in order to effectively leverage from the root cause teams’ deep understanding of the underlying factors driving quality outcomes, the responsibility for remediation actions has been moved to the root cause team with a separate remediation monitoring team providing independent assessments of the effectiveness of the designed and implemented actions. Both teams have been set up to be operationally separate from audit teams and report through the Chief Auditor to the Head of Audit Quality.

The root cause team performs reviews on the findings from AQR, QAD and internal monitoring inspections. Ad hoc reviews can also be undertaken to consider audit-wide matters identified through a variety of other sources such as the firm’s Audit risk team, Office of General Counsel and the emerging issue process. The root cause team uses a variety of data points to inform interview questions and seeks to get to the bottom of why the issues occurred. We now have a stable RCA taxonomy with different levels of aggregation and disaggregation created to enable clear identification of root causes and enhance the design of targeted remedial actions. Categories have been created so that Quality Monitoring, Team Composition, Critical Mindset, Project Management and External Factors are separately identified.

The severity of root causes is assessed with the classifications being primary, secondary or contributory. Primary and secondary are subject to aggregation and reporting.

The outputs from the root cause activities are then utilised to develop appropriate responses in terms of remediation actions. The monitoring team assesses the effectiveness of these actions, proposing adjustments where they are not having the desired impact. Regular monitoring of the impact of remedial actions is a key part of our RCA programme so that we can adapt our approach as new issues arise. We apply a mix of remedial actions focusing on both firm-wide and specific engagement team actions with an overarching goal of driving a sustainable High Challenge, High Support culture. The monitoring team analyses the forms of remediation previously undertaken and the effectiveness of those actions to provide a framework to assess the likelihood of success for future actions.

In the past year we have continued to embed the improvements in the process established since 2023 and have further explored ways to drive behaviour change, including designing actions responsive to the factors that drive individuals’ behaviour as identified by utilising the soft controls model. The introduction of scalable root cause activities has enabled a targeted, timely response to a broader range of issues. The investment made in the team since 2023 has resulted in a further acceleration in timelines to respond to audit quality related matters in terms of determining root causes and designing responsive actions, and continues to increase the extent and breadth of reviews undertaken.

Monitoring: data-driven audits

The continued development of our global audit tool (KCw) has enabled us to enhance how we monitor the status of individual audits. We have developed milestones that audit teams are challenged to meet through the audit cycle with the objective of completing as much work as possible in advance of the post-year end compressed timeframe, ensuring that teams have the requisite time to stand back and assimilate their audit findings before signing their opinions. This, together with the use of data mining tools to increase real-time visibility of progress and identify the need for direct intervention to provide additional support to teams, helps ensure that the right work is being undertaken by the right people at the right time.

We are pleased with the progress made in re-phasing work across our portfolio to date, but there is more to do as we work with audited entities on improving the timeliness and quality of management information which is needed to achieve the milestones and avoid rework. Last year, we launched a new monitoring programme to proactively identify at-risk engagements and provide targeted support. We plan to continue developing this initiative in the coming year to optimise its effectiveness in identifying outliers across our entire portfolio.

This is at the heart of how we drive a mindset focused on quality and continuous improvement.

The People and culture section sets out in detail how we are placing a culture of “High Challenge, High Support” at the centre of our values-based approach, to help drive audit quality and create an environment of continuous improvement.

To ensure we make swift, consistent and sound decisions about which entities we work with and what work we do, we apply our well-established acceptance and continuance policies rigorously. We start evaluating all prospective audited entities right from the decision to participate in a tender. Our checks cover conflicts of interest, independence and the identity and integrity of management and owners.

All new entity evaluations and evaluations with changes in risk grades are reviewed by a second partner. Engagement continuance evaluations that are medium risk or have an increased risk rating from the previous year are also subject to review by a second partner. Additionally, all new engagement evaluations, including high-risk ones and those with a decreased risk rating compared to the prior year, will be reviewed by the Audit Chief Risk Officer or their delegates. The review process may identify additional mitigations against specific audit risks such as information security and data privacy.

We reconsider whether to continue as auditor on each recurring audit within a 45-day period after concluding the previous year audit. We take into account any perceived weaknesses within the audited entity’s governance structure, control environment, finance function, culture and behaviours. We also consider any known or suspected non-compliance with laws and regulations. If there are significant risks to audit quality, we may impose conditions on our continuance as auditor.

Conditions on continuance are issued in writing to those charged with governance, allowing the engagement leader to document the issues experienced during the audit and outline necessary steps or actions required by those charged with governance. Tools have been developed to support engagement leaders in monitoring progress against these conditions. If there is little evidence of progress, the engagement leader will escalate the case to the Head of Business Risk for further consideration, which could include a formal continuance panel. We collaborate with audited entity management to agree on conditions and monitor progress against commitments.

We are committed to being a place where diverse talent can flourish and recognise that it is the quality of our people that will ultimately determine our success.

The People and culture section explains the measures and policies we have in place to ensure we remain focused on diversity, skills and quality.

Quality remains at the heart of our Audit Strategy and we remain committed to continuous improvement. Our KPMG Clara workflow (KCw) platform continues to be the foundational tool for delivering our audits and supports our people in executing high-quality audits and responding consistently to identified risks.

KCw is accompanied by the KPMG Audit Execution Guide (KAEG) which sets out our methodology requirements. The methodology is based on the requirements of the International Standards on Auditing (ISAs) and all member firms are required to follow it. KAEG also includes additional requirements that go beyond the ISAs and which KPMG believes enhance the quality and value of our audits.

At KPMG in the UK, we add local requirements and guidance to comply with additional professional, legal or regulatory requirements specific to the UK, our own internal policies, and to proactively respond to economic or industry events. KCw provides our audit teams with access to such requirements and industry knowledge, with smart libraries embedded within the tool. This allows for a consistent approach, tailored by industry, and focused on key audit risks. To further support our teams, standardised workpapers and guidance assist our audit teams in consistent delivery. Our UK Audit Requirements Tool supports the scalable delivery of such standardised work papers to our people in a manner that is consistent with, and complementary to, KCw.

Consistent with our Single Quality Plan, we are also focused on simplification of the resources we provide to our colleagues to best allow them to effectively execute their work.

Our approach to audit quality also has technological evolution at its heart, as further set out in the Embracing digital technology section.

Deep technical expertise and knowledge

We are committed to ensuring that audit professionals have appropriate audit, accounting and industry knowledge, experience and training. Our accreditation process enables us to ensure the right partners and employees are assigned to engagements and are licensed where necessary.

Our formal audit training programme supports the development of technical expertise and knowledge within our audit practice. It includes mandatory audit and accounting technical training, industry-specific training and risk courses. This is supported by centrally run fortnightly technical briefings, lunch and learns on new and fundamental topics, drop-in clinics and locally run sessions using centrally developed content.

This year, our flagship training programme, KPMG Audit University (KAU), ran over three days and was attended by 3,056 (FY24: 3,058) Audit and IT Audit colleagues. The theme for our 2025 KAU was “Tailored learning; Technological excellence” and had a particular focus on data literacy for preparers and reviewers, FRS102 and Group audits. It also provided a range of topics for individuals to select from, to reflect their personal development needs and audit portfolio. These included: the Audit of AI, AI Transaction Scoring, Walkthroughs and Flowcharting, Impact and Influence, Presentation Skills and Commercial Conversations, as well as industry specific content. As well as linking multiple UK locations for the event kick-offs, we also ran some sessions directly with our offshore KPMG Global Services (KGS) colleagues. They had the same content as their onshore counterparts and also had some senior onshore colleagues join them to deliver some of the content directly.

Beyond KAU, the mandatory learning curriculum includes biannual updates focusing on performing an effective quality audit with different topic areas included as relevant. An Audit Quality and Risk Workshop is delivered for engagement leaders and focuses on key messages driven by internal and external monitoring findings. This content is also extended to audit managers and senior managers through live and recorded workshops.

In addition, partners and audit professionals must complete training relevant to their grade and role. This includes sector-specific training as well as training to support staff in their roles, such as working on US engagements, and has included a new global insurance curriculum this year. Completion of such training is built into accreditation requirements to work on specified engagements, which we manage through our eQualify system. Our curriculum extends beyond audit technical learning. For example, our ‘Building Trust’ risk training has this year focused on regulatory and compliance, client acceptance, our Code of Conduct, protecting information, and firm and personal independence. As well as the technical curriculum, auditors spend time on skills programmes to support their career and professional development.

The table below shows the actual average learning hours and the planned minimum mandatory learning hours for all grades in audit for FY25 and comparative data for FY24.

¹ Average learning hours include all learning completed and recorded in our learning management system by all audit grades. This includes mandatory audit, accounting and compliance training and any other learning required for specific engagement accreditation, such as auditing and reporting under US standards. It also includes other business and skills related learning.

There is a slight reduction in average learning hours for Partners and Directors as the initial push for technical ESG learning was not required in 2025 due to the EU Omnibus decision. For Senior Managers and Managers, the increase has been a result of a new programme targeting first-year managers covering technical and non-technical content. For other qualified staff, the increase has been as a result of a full year of a new Experienced in-charge auditor programme running. The non-qualified staff have seen a large increase due to a timing difference of the Audit Foundations training for our graduate new joiners. They completed no Audit Foundations training in their first year with the firm last year, as they worked solely on their professional qualifications and then completed all elements of the Audit Foundations in their second year. This has distorted the figure for this year.

Technical support for our engagement teams

Internal consultation, both formal and informal, is a fundamental contributor to quality; it is always encouraged and is mandated in certain circumstances. We provide appropriate consultation support to audit engagement professionals through professional practice resources – this includes our Chief Auditor, Chief Accountant, DPP Accounting & Reporting, DPP Audit, and Audit Risk Management. Mandatory consultation requirements include matters such as where we identify non-compliance with laws and regulations, where a team proposes to deviate from our standard methodology, or where certain risks such as issues with going concern are identified. Consulting on issues is a fundamental part of our High Challenge, High Support culture.

The Second Line of Defence team provides coaching and technical support through their hot review programme which provides feedback on both the audit approach and the clarity of audit documentation. Our US Accounting and Reporting group (USARG) based in London provides coaching and technical support for our US engagement teams, while further technical support is also available through our International Standards Group, as well as the US Capital Markets Group based in New York for work on SEC registrants.

We also have Audit Risk Panels, led by an audit quality or audit risk management partner and supported by an experienced field partner. These enable direct challenge of the approach to the key audit issues on our highest risk audits and support the team in reaching robust conclusions on approach and timing.

Technical support is available in the business in the form of a Quality Network and sampling professionals to provide local support to audit teams for certain areas related to sampling. There is the opportunity for audit professionals in the business to be facilitators on technical courses (e.g. KAU) and they take that technical knowledge back into the business. Emphasis is also placed on the importance of coaching, both within teams and centrally, building strong teams that support each other.

Additionally, there are delivery centres and centres of excellence involved in our delivery of some specific areas of the audit, such as (but not limited to) cyber, data analysis and the audit of pensions.

We continue to refine our processes and controls to ensure we can mitigate and respond to risks which would affect audit quality. Our key control processes include:

Audit Quality Council

The Audit Quality Council is a forum for the leaders of our Audit Quality central teams and those with a role in driving audit quality activity in our Audit Performance Groups to discuss and agree on actions to implement our audit quality strategy. The Council meets monthly and receives updates from our Audit Quality central teams on their observations and activity for the month together with consideration of actions to address any emerging issues. Progress on both internal and external inspections are discussed and remedial actions from prior reviews and inspections are monitored for effectiveness. Our audit learning plan is also approved at the Quality Council on an annual basis. The meeting is chaired by the Head of Audit Quality with members of the Quality Council including the heads of the Audit Quality teams, e.g. Departments of Professional Practice, Second Line of Defence, Chief Auditor, Chief Accountant, and heads of internal and external inspections. The meeting is also attended by the Chief Risk Officer (CRO) for Audit, Audit Learning Director, Head of Culture for Audit, and the partners who lead on Quality in the Audit Performance Groups including our offshore Quality Team.

Audit Risk sub-committee

The Audit Risk sub-committee meets monthly to assess and proactively address the risks across our Public Interest Entity, Other Entities of Public Interest, and wider audited entity portfolios. The main areas considered by the sub-committee include the assessment and challenge of the safeguards and mitigations in place in response to the movement in internally calculated risk scores associated with individual audited entities and sectors; the response to the Second Line of Defence team’s assessment of individual audit engagements; updates on regulatory developments and the status of associated regulatory commitments; and the identified actions in response to entities, engagements and themes included on the capability risk watchlist. Membership of the sub-committee includes the Audit Chief Risk Officer as Chair, Head of Audit Quality, Chief Auditor, Chief Accountant, Head of Audit Regulatory Compliance, risk partners and performance group leaders from the key Audit Performance Groups across the Audit capability.

Annual review of engagement leader portfolios

The Chief Risk Officer for Audit assesses Responsible Individual (RI) workload by considering a multitude of factors including but not limited to size of portfolio, pinch points, quality metrics, significant internal roles, hours worked and sickness. These factors are weighted and red, amber or green (RAG) score ratings are then attributed to in-scope RIs. Each RI completes a questionnaire and is then interviewed by a former partner or partner outside of their Performance Group where they can discuss their RAG score, portfolio, personal wellbeing, level of support across their portfolio of engagements and any other concerns they may have. Ratings may then be adjusted based on the outcomes from the questionnaire, the interview process and subsequent discussions held with the respective Performance Group Leadership to address key findings and develop appropriate mitigations where needed. Findings are reported to Audit Risk Management and Audit Leadership, who take action as required.

Accreditation

To drive continuous improvement of audit quality, we need to have the right people with the right skills, doing the right work at the right time.

Our audit portfolio has been divided into segments based on the risk and nature of the entities subject to audit. This has resulted in three defined main accreditation segments for managers and above – Listed and Regulated, Private Capital, and Public Sector.

Each main accreditation segment is in turn made up of a number of sub-segments, enabling targeted competence and capability requirements within the overall accreditation segment.

Additional technical audit requirements apply to individual audits of certain entities. Each technical overlay has additional technical capabilities and some involve specific training over and above those of the three accreditation segments. Those technical overlays without specific training requirements are awarded at the discretion of the Audit Chief Risk Officer or Chief Auditor.

Accreditation requirements are determined at the engagement level and are driven by the sub-segment of the audited entity.

On an annual basis, all auditors from Manager to Partner are awarded Accreditation(s) on the basis of their experience and training.

eQualify software tracks whether individuals hold the accreditations needed to work on an audit in a more robust fashion. A one-stop solution to people’s accreditations, eQualify deals with audit accreditations (calculated based on hours spent on work in the sub-segments which make up Listed and Regulated, Private Capital, and Public Sector) and technical overlays, which are requirements specific to individual audited entities as discussed above. Each individual in KPMG in the UK and KGS in India has a profile in eQualify and can see at a glance what Accreditations and Audit Technical overlays they hold. They can also see if they need any further Accreditations, for which they can request a waiver which is approved by the Head of Accreditation, or technical overlays, both of which are linked to the jobs in their portfolio. If they require a new technical overlay, the detail in the overlay links directly to our Learning Management system and each person can assign themselves the relevant training without the need to consult. Once they have completed the relevant training, the technical overlay is automatically marked “green” in the entity profile on which they are working. eQualify allows engagement leaders and engagement managers to ensure that everyone requiring an accreditation on their engagement has one on a timely basis.

With effect from 5 December 2022, regulations introduced by the FRC have required all audit engagement leaders who sign UK public interest entity audits to be registered on the PIE Auditor Register (PAR). Our accreditation process supports our assessment of those engagement leaders registered to audit UK PIEs. As at 30 September 2025, the firm had 104 Responsible Individuals included on the PAR.

Audit risk panels

Audit risk panels are held at planning and completion stage on certain higher-risk engagements to challenge the audit team on their key judgements and planned audit approach. These panels are held prior to key communications with audit committees and include a review of the planned communications and financial statements (including the audit report). Each panel is chaired by an audit quality partner and supported by an experienced field partner and includes key members from the engagement team as well as the Second Line of Defence reviewer, where applicable. Actions coming from the panel are monitored by the panel chair and in previous years have included to delay signing, to consult further with a technical expert, to adjust the audit approach, or to challenge further the clarity of disclosures in the annual report. In a recent survey of engagement teams, an overwhelming majority found them a useful process for challenging and refining their approach.

Second Line of Defence “hot reviews”

Our Second Line of Defence team is a coaching function that provides challenge and support to selected audit teams to enhance audit quality. It seeks to mitigate execution risk in the most significant areas of the audit for relevant engagements by evaluating and providing feedback on both the audit approach and the clarity of audit documentation. We have continued to develop our Second Line of Defence function in the current year. Notable developments this year included:

• Delivering additional hot reviews targeted at supporting staff in our offshore delivery centre.
• Refining our hot review methodology to remove mandatory review areas and instead further enhance the risk-based approach on which the scope of the reviews are performed.
• Following piloting in the previous year, we have implemented a new programme of topic reporting using functionality within our Second Line of Defence IT tool that allows deeper analysis of the quality themes identified by Second Line of Defence reviewers. This analysis is used as an input to our Emerging Issues process to inform ongoing investment in quality improvements.

Our Second Line of Defence reviewers provide monthly reporting to Performance Group Leaders with an assessment of the engagements they are supporting and a RAG rating of the risks facing the engagement team from a resourcing or quality point of view. The RAG rating alerts the Performance Group Leaders to the need to take remedial action to mitigate any delivery risks.

Pre-issuance review of annual reports by the Department of Professional Practice

For listed or high-risk entities, an independent review of the annual report is carried out by the Department of Professional Practice prior to the audit report being signed. This review aims to identify and resolve instances of material non-compliance with reporting requirements and areas where disclosures are unclear or could be improved.

The final element of the pre-issuance review is necessarily conducted when a final draft of the annual report is available, which typically occurs towards the end of the audit process. However, for the highest-risk engagements, pre-issuance review teams are allocated early in the audit cycle to encourage discussion of accounting and reporting matters with the reviewer throughout the course of the audit. We also encourage all audit teams to hold upfront planning discussions with their pre-issuance reviewer to help minimise the number of issues identified late in the audit process.

We continue to encourage entities to progress their annual reports earlier to facilitate pre-issuance reviews on an earlier draft of the document. Where this is not feasible, the pre-issuance reviewer can review individual disclosure notes where these are new or considered by the audit team to be higher risk.

This year we have continued to develop our pre-issuance review guidance and process to further support audit teams and enhance the quality of the audit. This includes additional training for reviewers on how to effectively identify significant issues and assess their materiality, and further refinements to the process to promote constructive dialogue between the reviewer and the audit team.

Emerging Issues process

The Emerging Issues (EI) process is a standard reporting framework which captures emerging audit quality issues, evaluating common emerging issues identified across our technical teams, findings from internal and external quality reviews, and other external sources. Actual or potential emerging issues are identified from a number of sources including audit leadership, field auditors, the Audit Centre of Excellence (ACE) and audit quality monitoring activities (on both live and completed engagements). In addition, other potential emerging issues are identified from third party sources such as FRC announcements, press comments and other regulatory announcements. This allows us to capture an inventory of possible emerging issues, based on the activities of ACE and more widely across the audit practice. The EI process aggregates themes, prioritises them and provides mitigating responses to the audit practice in a timely manner.

The Chief Auditor presents a monthly summary discussion paper at the Audit Quality Council (AQC) for approval of the proposed actions. Root Cause Analysis (RCA) will be used to investigate selected issues where more detailed insight is needed before a response can be developed and deployed. This complements the existing RCA process focused on quality review findings.

The EI framework is designed to capture emerging issues and deliver timely responses to them. However, we recognise that, from time to time, a faster reaction may be needed. For example, issues may arise that are considered by the AQC to be of sufficient significance (i.e. they relate to a matter that audit teams more generally need to be aware of in short order to ensure audit quality) as to require a more immediate response, or an interim response while a longer-term solution is developed. These urgent escalations will either be in the form of communication in the DPP Bulletin or via an immediate communication from relevant audit leadership if an even swifter response is required.

We monitor the effectiveness of actions taken through existing monitoring processes in liaison with the action owners.

We are thoughtful and deliberate in our approach to applying technology to every KPMG audit. By applying a set of outcome-focused principles, we ensure that the technology we deploy has a clear purpose – supporting audit quality, generating actionable insights, creating capacity for both auditors and management, and enabling continuous innovation and improvement in the audit process.

In its recent Audit Quality Inspection and Supervision report (2025), the FRC highlighted our “clear strategy to effectively integrate new technology solutions”. We have made significant investment in innovative audit techniques using AI and are pleased to see this being recognised.

We continue to invest heavily in technology and work hand in hand with major technology alliance partners including Microsoft and Databricks to ensure we stay at the cutting edge.

KPMG Clara

KPMG Clara is our single global digital audit platform, used by just under 7,000 auditors to support the delivery of all audit opinions in the UK every year. Clara embeds technology across the audit, deploying capabilities to improve collaboration, workflow, automation and analytics – all enhanced by AI. KPMG Clara is built on secure, cutting-edge cloud technology and provides us with a foundation that we continually build and innovate upon. A few examples of what we have delivered in 2025 include:

• Collaboration – Updates to enhance the experience and streamline collaboration, helping our teams work with our audited entities more efficiently.
• Workflow – This year, we embedded an AI “quality coach” agent directly within Clara’s audit workflow, enabling our teams to get real-time feedback and suggestions to improve the quality of their work.
• Automation and Analytics– KPMG Clara AI Transaction Scoring has now supported the delivery of over 1,000 audits in the UK. This uses advanced AI and statistical techniques to power routines, analysing 100% of transactional data and providing evidence over areas such as point-in-time revenue and operating expenses. This capability was recently expanded to include identification of high-risk journal entries, resulting in a more targeted testing approach, deeper insights and enhanced quality.

Artificial intelligence

In line with our 2024 mission to put AI in the hands of every auditor, for use on every audit, we have made clear progress. Thousands of auditors now use Microsoft 365 Copilot daily to support productivity, and generative AI is embedded directly into audit workflows through KPMG Clara AI.

Two examples in KPMG Clara are:

• Flowcharting and walkthroughs: AI helps us to assess prior year documentation in preparation for walkthrough meetings, document our understanding from walkthrough meetings, and automatically generate process flowcharts, including identification of process risk points, relevant systems and controls.
• Analysing the annual report: AI supports our assessment of the company’s annual report and accounts by drafting responses to disclosure checklist questions and analysing the sentiment of each sentence of the annual report, to support our assessment of the fair, balanced and understandable criteria.

Alongside deploying new technology, we are equipping our professionals with the expertise they need to realise the potential of AI. Over the past year, our change and enablement programme has included training in prompt engineering, responsible and ethical use of AI, and drop-in clinics with technology alliance partners such as Microsoft e.g. our Microsoft CoPilot flight school series. These initiatives foster an ”AI-first” mindset and help our people embrace the latest technology. Our methodology and governance continue to evolve, enabling us to unlock the transformative benefits of artificial intelligence for our business, audited entities and the audit profession.

Our focus is now expanding to agentic AI that can intelligently reason, plan and then facilitate actions. Trust is fundamental, so we are prioritising transparency and human-in-the-loop validation to guide our approach; this allows us to embed AI into our procedures, processes and teams, unlocking greater productivity and opportunities for greater transformation.

Technology skills

Alongside the right technology, the right skills are vital. Our 2025 KPMG Audit University, a three-day residential training programme, built on previous years in establishing a digitally fluent audit workforce. Our focus this year has been data literacy, building an AI-first mindset, and training our auditors in how and when to use the right innovative solutions.

We also continue to increase our engagement with audited entity management and Audit Committees. Over the past year we have held over 40 events with audited entities in our KPMG Ignition facility, where working in a collaborative, technology-enabled environment allows us to bring to life how the technology works, how our auditors apply it, and what this means in the context of an entity’s data.

Stakeholder engagement

Building trust with our stakeholders is increasingly important as we navigate a complex and evolving corporate reporting ecosystem. Engaging with different groups allows us to share insights and developments, actively participate in matters impacting our profession and contribute to their solution, and understand users’ expectations of our reporting. For example, we actively engaged with regulators, government, professional bodies, investors and audit committee chairs on the UK’s audit and corporate governance reforms.

We have responded to consultations from our regulators throughout the year about changes to regulations, standards or codes, as well as discussion papers focused on strategic changes and plans at the regulator. This year, we have engaged with the FRC on their Future of Audit Supervision Strategy (FASS) and their End-to End Enforcement Review through the attendance of roundtables, responses to discussion papers and individual meetings to discuss the proposals. While the current supervisory model has achieved improvements, we agree that there is now an opportunity to redesign and evolve the supervisory approach, bringing proportionality and driving improvements in a diverse and growing audit market. We are committed to working with the FRC as they develop their proposals further.

The forthcoming consultation on the modernisation of corporate reporting will be an opportunity to reassess what information stakeholders wish to see disclosed publicly. Through consultations, the government has a chance to streamline and simplify the framework, making compliance more straightforward and manageable for businesses, while still meeting the needs of stakeholders and upholding public interest.

Audit Committee Institute

Our Audit Committee Institute (ACI) provides guidance and resources to audit committees, helping to facilitate the skills and knowledge required to deliver their role. The ACI helps to enhance audit committees’ understanding and awareness of topical issues – with a view to contributing positively to the long-term sustainability of UK plc. The ACI in the UK now has 2,388 (2024: 2,354) members across both the private and public sectors.

Financial reporting, compliance, risk and internal control environments have been put to the test by an array of challenges, including global economic volatility and an especially tense geopolitical landscape including wars in Ukraine and the Middle East, as well as cybersecurity risks, serious ransomware attacks, and rapid developments in AI. These challenges bring both opportunities and risks – our audit committee seminars and thought leadership have covered a wide range of these topics.

Of note have been our discussions around the government’s audit and corporate governance reform agenda, geopolitics, ESG, cybersecurity and financial crime. Our seminars on generational shifts in society and the future of audit have been especially well-received. Thought leadership highlights have included:

• On the 2025 audit committee agenda
• FTSE350 Audit Committee Survey
• Oversight of data related risks
• Refocusing on IDE Considerations for UK boards
• In the Hot Seat: The evolving role of UK boards

Investor engagement

High quality information, effective governance and trusted assurance remain essential foundations for strong capital markets. KPMG’s Investor Insights programme facilitates communication between auditors, who provide vital assurance over financial statements, and investors, who rely on that assurance.

Our programme aims to:

• Provide a forum to discuss and share perspectives on how corporate reporting and governance can evolve to meet investors’ needs today and in the future.
• Explain the implications of developments in corporate reporting and assurance from an investor’s point of view, including emerging regulatory and market trends.

Over the past year, we expanded our direct engagement with institutional investors, investor organisations and market bodies to ensure our understanding of investor priorities remains current and our responses stay relevant and practical.

Our conversations with investors have covered a wide range of priorities, including evolving governance expectations, the UK Stewardship Code, sustainability and climate reporting, corporate reporting developments, and the implications of new accounting standards. We have also discussed the future of assurance, including ESG and climate-related disclosures, and explored ways to improve the decision-usefulness of reporting. These discussions reflect the growing expectation from investors that sustainability information is prepared to the same standard as financial statements.

Looking ahead, we will continue to expand our programme through a series of events and roundtables on emerging topics in corporate reporting and assurance.

The insight and constructive challenge we receive from investors throughout the year is appreciated, and we look forward to this dialogue continuing. More information, publications and contact details can be found on our Investor Insights website.

Political engagement

As a leading professional services firm, we recognise the importance of engaging with politicians, policy makers and our regulators on issues of importance to business and society, such as the Modern Industrial Strategy and the wider UK growth agenda, as well as those directly relevant to our own core business. We are committed to ensuring that our political engagement is based on principles of transparency, integrity and accountability, and we maintain a position of political neutrality at all times. We have a firm-wide political relationships and activity policy that all colleagues must comply with to ensure we demonstrate best practice at all levels of engagement.

The Policy and Reputation Group (PRG)

We are active members of the PRG, which is a group made up of representatives from the seven largest audit firms and networks, plus an observer from a Group A¹ firm. The group meets regularly to discuss evolving public interest issues and how these might be addressed to help maintain confidence in the profession to support the UK economy.

¹Group A represents multi-disciplinary accountancy, audit and advisory firms and networks with a national presence across the UK. It has a strong collective presence in the UK’s SME audit market.

The Centre for Public Interest Audit (CPIA)

With the other PRG firms, we supported the establishment of the CPIA in 2024, which is a policy and research institute formed to improve audit quality across the profession. An audit partner from KPMG is a member of the CPIA Board. The launch event in March 2025 focused on the value of audit, and how meaningful reform should result in higher quality reporting and governance.

Internal communication

We drive engagement through a dynamic mix of internal communications, including:

Talking Audit, an online news publication that is distributed every six weeks with a focus on practice and firm-wide updates. The content includes: a video introduction from Cath Burnet, Head of Audit, clear actions for colleagues, and Audit progress aligned to our strategic priorities (Empowering Our People, Delivering Sustainable Quality, Embracing Tech-enabled Delivery, and Maintaining Robust Growth).

The Audit Team Talk is shared tri-annually and supplements Talking Audit. Team Talk provides leaders with all the information they need to share updates in a way that best suits their team’s needs. We continuously seek and evaluate feedback to allow us to enhance our communication strategy and outputs.

Our monthly Audit Partner and Director calls are hosted via Microsoft Teams and ensure our leadership are informed on topical updates (from economic, regulatory and governance issues to strategy, quality and people matters). They also provide leaders with an opportunity to ask questions and discuss complementary key messages and actions.

We also host an annual ‘Audit Connect’ event for Audit partners and directors where we look back on progress, share successes and learnings, and galvanise leaders around the strategy and opportunities for the upcoming year.

Viva Engage is our internal social media channel and enables colleagues in Audit to collaborate and share updates, knowledge and praise. We’ve seen higher engagement with this more informal style of communication, particularly with the younger demographic in Audit.

Life Accounts is our series of people stories from Audit colleagues. They explore the variety of roles and career paths within the practice, helping bring to life our approach to supporting inclusion, diversity and equity and our High Challenge, High Support culture.

We also publish ‘win’ articles on our intranet, which is an important way to celebrate our Audit successes and demonstrates how we contribute to the growth ambitions of the firm.

Ask me anything is a monthly series where colleagues can join a discussion with members of the Audit Executive to ask questions or share thoughts and feedback. The discussions within this forum are confidential and colleagues are encouraged to share what’s on their mind.

Finally, since merging with the Swiss firm, we share a quarterly email to all Audit colleagues across both countries that updates on joint progress and highlights how we’ve connected and collaborated across the UK and Swiss Audit practices.

These are crucial attributes for anyone connected to Audit.

The Quality control and risk management section explains the processes and controls we have in place to ensure we meet the standards required.