KPMG N.V. integrated report FY19 Including the KPMG Accountants N.V. Transparency Report Contents 1. KPMG in FY19 at a glance 2. Overview and strategy 3. Guide to this integrated report 4. Performance and developments 5. Governance and compliance 6. Financial statements 7. Other information 8. Appendices 1 2 3 4 5 6 7 8 KPMG N.V. integrated report FY19 | © 2019 KPMG N.V. All rights reserved. 2 Contents Section 1 | KPMG in FY19 at a glance 5 Sustainable employability 29 Strengthening our capital position 36 1. KPMG in FY19 at a glance Rewards and recognition 29 Business Services 36 Section 2 | Overview and strategy 7 2. Overview and strategy The way forward in FY20 29 External codes of conduct 36 The year at a glance: Trust & Growth, year 1 8 3. Guide to this integrated Clients and Technology 30 Section 5 | Governance and compliance 37 On a personal note 10 report Clients – Agile or irrelevant 30 Supervisory Board report 38 4. Performance and Section 3 | Guide to this integrated report 11 developments Client experience 30 Overview of the year 38 Section 4 | Performance and developments 13 Client engagements 31 5. Governance and Supervisory Board overview 40 compliance Public Trust – High standards in everything we do 14 Client satisfaction 31 Public Interest Committee (dissolved as at 1 September Introduction 14 2019) 41 6. Financial statements Technology: 100% digitally enabled solutions 32 Quality vision 14 Audit & Risk Committee 44 Technology in audit 32 7. Other information Quality as a relevant service 15 Remuneration & Appointment Committee 46 Digitalise the firm 32 Quality is an effective process 16 Assurance Quality Committee 47 8. Appendices The growth of our digital portfolio 33 Compliance with our quality management system 19 Supervisory Board composition 48 Leveraging our international network 33 Audit Quality Indicators 19 Diversity 49 Leveraging our partnerships 33 Stakeholder dialogue 20 Independence 49 Leveraging our ecosystem 33 Creating shared value 21 Education programme 49 Audit and advisory fees 34 Supervisory Board and Board of Management People – The best development experience 24 Financial Strength – Long-term above-average evaluation 49 Our People are Extraordinary 24 growth 35 Financial statements and discharge 50 Inclusion and diversity 25 Introduction 35 Word of appreciation 50 Innovative and data-driven recruitment 27 Results for the year 35 Members of the Supervisory Board 51 Talent development 28 Investment programme 36 KPMG N.V. integrated report FY19 | © 2019 KPMG N.V. All rights reserved. 3 Contents Remuneration report 52 Our relentless focus on quality 62 Consolidated statement of changes in equity 85 1. KPMG in FY19 at a glance Partner remuneration 52 In control statement 63 Notes to the consolidated financial statements 86 2. Overview and strategy Board of Management remuneration 53 System of quality controls 64 Company statement of financial position 122 3. Guide to this integrated Supervisory Board remuneration 53 Overall system of quality controls 64 Company statement of profit or loss and other report Governance 54 How policies are applied 64 comprehensive income 123 4. Performance and developments Legal structure and ownership 54 Quality Framework 65 Notes to the company financial statements 124 5. Governance and Supervisory Board 54 1. Tone at the top 65 Section 7 | Other information 129 compliance Board of Management 54 2. Association with the right clients 67 Independent auditor’s report 130 6. Financial statements Office of the Board 56 3. Clear standards and robust tools 68 Provisions in the Company’s Articles of Association 7. Other information Group Leadership Team 56 4. Recruitment, development and assignment of governing the appropriation of profit 130 appropriately qualified personnel 70 Leadership Team Assurance 56 Section 8 | Appendices 135 8. Appendices 5. Commitment to technical excellence and quality Leadership Team Advisory 56 service delivery 73 Report boundary 136 Leadership Team Business Services 56 6. Performance of effective and efficient Supply chain 137 engagements 75 Organisational structure 56 Comparability of information 139 Network 56 7. Commitment to continuous improvement 77 General information 140 Risk management 58 Section 6 | Financial statements 80 Strategic pillars and KPIs 141 Risk philosophy 58 Consolidated statement of profit or loss and other comprehensive income 82 Public interest entity or OOB audit clients 144 Top strategic risks and related controls 59 Consolidated statement of financial position 83 Global Reporting Index (GRI) 147 Financial risks 62 Consolidated statement of cash flows 84 Glossary 151 Effectiveness of mitigating risk actions 62 KPMG N.V. integrated report FY19 | © 2019 KPMG N.V. All rights reserved. 4 1. KPMG in FY19 at a glance 1. KPMG in FY19 at a glance Revenue growth Profit before income tax growth Investments (intangible assets) Audit technology investments growth (in €m) (compared to FY18) 2. Overview and strategy Overall 3. Guide to this integrated report 4. Performance and + 9.3% developments +2.7% 5. Governance and compliance 7.5% 11.8% 17.1 5.8 +46% 6. Financial statements Assurance Advisory FY19 FY18 7. Other information 8. Appendices Client satisfaction KPMG is the second most Audit quality CO2 neutral for 9 years valuable Dutch brand (results internal inspections) (renewable energy & VER) (according to Brand Finance) 68% in FY18 2 99.8% 91% 86% 98% 75% neutral FY19 FY18 FY19 FY18 Assurance Advisory KPMG N.V. integrated report FY19 | © 2019 KPMG N.V. All rights reserved. 5 1. KPMG in FY19 at a glance FTEs Female employees Female hires Number of nationalities Average age 3,282 in FY18 38% in FY18 37% in FY18 2. Overview and strategy 3. Guide to this integrated report 4. Performance and 66 developments 5. Governance and 3,563 34 compliance 6. Financial statements 7. Other information 8. Appendices Investment in training Well-being index Inspections praise (quality- Retention rate Employee engagement Budget compared to FY18 60% in FY18 oriented) working culture 84% in FY18 On a scale of 100 +12% 81 KPMG N.V. integrated report FY19 | © 2019 KPMG N.V. All rights reserved. 6 Overview and strategy KPMG N.V. integrated report FY19 | © 2019 KPMG N.V. All rights reserved. 7 2. Overview and strategy The year at a glance: Trust & Growth, year 1 1. KPMG in FY19 at a glance As a firm, KPMG N.V. (KPMG) will earn society’s trust through the excellence and quality of our work, the integrity and strength of our people and culture, and 2. Overview and strategy our aspiration to empower the major transformations challenging our world today. 3. Guide to this integrated report Societal transformations require solutions now, under Public Trust ourselves to further improve in the audit domain as we 4. Performance and pressure and with the clock ticking: the uncertainty of the In the first year of our Trust & Growth strategy, we realise that 75% audit quality is not enough. We will keep developments global outlook in which our open, outward-looking country focused relentlessly on quality. Given our position in looking for root causes when we detect mistakes, and turn 5. Governance and plays an important role, the need to embrace resilience society we put quality first on our strategic agenda and it these into sustainable learnings. We are resolved to compliance and agility in the ongoing technological transformation of is our clear conviction that this is the only way to build continue to improve, underpinned by a significant organisations. These transformations bring both dynamic trust. We are achieving this through continuous investment in quality, including the implementation of a 6. Financial statements risks and opportunities for disruption and digitalisation. investment or in our quality culture and our professionals. new audit platform. We are responding to societal Over the years we have increased the time we invest in expectations to address fraud and continuity in a more 7. Other information On an even larger scale, our society and the whole world our engagements, and expanded the coaching and proactive way: our internal consultations on fraud have is grappling with the dilemmas of climate change and professional support we provide to our people. more than tripled over the last three years. 8. Appendices welfare distribution. Society is looking for business leaders to make the right choices to transition to a clean We have put more focus on the needs of the individual We are fully aware of our public responsibility and our technological future, a future that is fair and safe and in professional and our teams by innovating the way we stakeholders’ justified expectations from us of quality, which we want our children to live. Empowering business work. This allows us to spend focused time in the right integrity, objectivity and sound judgement. We engage in leaders with options to make the right choices through our way, to support the work-life balance in our teams and to an active dialogue with the regulators and use each report work as accountants and advisors makes us relevant. We invest in training and education. We have designed and and interaction as an impetus to improve. In FY19, the have an inspiring purpose. With that comes a major improved on our quality (training) programme together Minister of Finance established the Committee on the responsibility. with our Young Audit Quality Board to ensure that the Future of the Audit Sector (CTA) with the aim of delivering needs and aspirations of future generations are an proposals that will increase the overall quality of the Dutch Our strategic plan for FY19 provided guidance and focus integral part of what we do, and that we are fit for the accountancy sector. We welcomed the CTA’s formation on five strategic areas: Public Trust, Clients, People, future. as we are wholly committed to doing what it takes to Technology and Financial Strength.