Transparency Report 2016/2017 KPMG

kpmg.se Our values

KPMG is a values-driven organization. To us, the way we work is just as important as the work itself. These seven values describe our outlook towards each other, and towards the world at large. All KPMG employees throughout the world share this approach.

We lead by example At all levels we act in a way that exemplifies what we expect of each other and our member firms’ clients.

We work together We bring out the best in each other and create strong and successful working relationships.

We respect the individual We respect people for who they are and for their knowledge, skills and experience as individuals and team members.

We seek the facts and provide insight By challenging assumptions and pursuing facts, we strengthen our reputation as trusted and objective business advisers.

We are open and honest in our communication We share information, insight and advice frequently and constructively and manage tough situations with courage and candor.

We are committed to our communities We act as responsible corporate citizens by broadening our skills, experience and perspectives through work in our communities and protecting the environment.

Above all, we act with integrity We are constantly striving to uphold the highest professional standards, provide sound advice and rigorously maintain our independence. Our values

Contents 1 2 3 4

From the Senior Inspiring Structure and Our quality Partner confidence, governance assurance systems empowering change 5 6 7 8

Our Principles of Financial Audit clients independence remuneration to information partners From the 1 Senior Partner

Welcome to KPMG Sweden’s KPMG employees around the world all have Transparency Report a shared view of the ’s role and values, vision, goals and strategy. According The report is aimed at anyone who is inter- to our annual employee survey, 80% of our ested in finding out more about the way employees are proud to work at KPMG. our firm is structured and how we work on quality, ethics and independence. It has In this Transparency Report, we take the been produced according to the require- opportunity to provide our stakeholders with ments of Article 13 (1) of EU Regulation a more detailed description of our internal 5337/2014 on specific requirements regard- control and risk procedures, but also how ing statutory audit of public interest enti- we are continually developing in order to ties, and pertains to the fiscal year from build trust and help our clients to change. 1 October 2016 to 30 September 2017. We aspire to: – Earn the trust of the public and inspire KPMG stands for the highest imaginable confidence in the capital markets by bring- quality and service in everything we do. In ing to life our commitment to quality, ethics each and every one of the 60,000 engage- and integrity through our culture and values. ments that we perform each year, we do our utmost to meet the clients’ needs and – Ensure that our people are extra- exceed their expectations. From a client ordinary by finding and nurturing talent, perspective, the Swedish Quality Index (SKI) creating high-performing teams and deploy- provides an indication of how well we are ing talented, well-trained personnel in our succeeding in this. In this year’s index we global network. achieved a rating of 74.3, an increase on – Support a relentless focus on quality the previous year and a signal that we are and excellence in client engagements and working in the right direction. We want to provide valued insights, so that clients see safeguard our key role in business. Creating a difference in us. security around investments and business choices for our clients, their owners and – Drive continuous improvement through stakeholders involves great trust. We are robust quality monitoring, with an increased proud of how we help to develop communi- focus on getting to the root cause of quality ties in Sweden and globally. We will continue issues and effective remediation. to do so, with our sights set firmly on tomorrow’s challenges and opportunities. We are committed to working closely with regulators, audit committees, investors and To us, the way we work is just as important businesses to meet the expectations of as the work itself. We challenge ourselves stakeholders and welcome ongoing dialogue to improve continually. Our leadership points as we strive for continuous improvement. the way and has the ultimate responsibility for setting ethical standards and ensuring , January 30, 2018 that we have well-functioning tools and processes so that we can develop and Magnus Fagerstedt reach our goals. Senior Partner

4 | TRANSPARENCY REPORT 2016/2017 From the Inspiring confidence, Senior Partner 2 empowering change

Whether you turn to KPMG for auditing or We provide quality assurance for informa- for advice on tax and other matters, our tion and decision-making. Our knowledge work is all about helping you understand creates security around investments and the current position of your business and business choices for our clients, their giving you the support you need to drive owners and stakeholders. Our expertise it forward in the best way to achieve is built on factual insight and collaboration. excellence. A combination of expertise will often Globalization and technological develop- be needed to deal with various kinds of 80% ment are changing the way we live and issues. This is why our teams regularly work. Ones and zeros are capable of consist of different specialists who managing practically everything – both observe how the world is changing and the things we are familiar with today and who analyze, structure, investigate and those we will get to know tomorrow. The help you to implement change. circumstances in which and of our employees organizations exist, work and succeed We come from widely differing back- are changing. As the market economy grounds, but have one thing in common: are proud to continues to conquer new ground in we have all chosen to join a knowledge many parts of the world, efforts to company in which curiosity and involve- work at KPMG achieve competition neutrality and a ment go hand-in-hand with quality, stable supply of capital are leading to professionalism and integrity. increased regulation in other parts. The political agenda is increasingly character- Together we create a tangible difference, ized by divided views rather than consen- both for you as the client and in the world sus, resulting in instability in both the around us. Everything we do, as an geopolitical situation and the global organization and as individuals, is about economy. inspiring confidence and empowering change. To achieve success it is necessary to understand, embrace and implement change. To seize opportunities and minimize risks. To be fast and robust enough to take advantage of all the positive things that change involves. KPMG is at the heart of this world, and along with our clients we are drawing the map of where we are today and where we want to be tomorrow. Our experts can advise you in how to deal with risks and guide you in complying with new requirements and regulations.

TRANSPARENCY REPORT 2016/2017 | 5 Structure and 3 governance

Legal structure and advisory services. The member firms KPMG AB is part of a group of firms, of in the network operate with local and which the parent company is Bohlins- legal independence in countries all over Today KPMG Sweden is gruppen AB. The group also includes the world. They have access to shared Bohlinsgruppen i Sverige Försäkring AB resources, methods and insurance cover, owned by around 100 (BISFAB), which insures risks attributable to as well as to the combined knowledge the business activity in Bohlinsgruppen AB. and expertise of the international net- partners, all of whom work work. All member firms are obliged to The Bohlinsgruppen Group comply with KPMG International’s shared in the company standards and policies.

KPMG International carries out quality controls and follows up on an ongoing Governance of Bohlinsgruppen AB basis on issues relating to the provision Shareholders KPMG AB Bohlinsgruppen i Sverige Dormant Försäkrings AB subsidiary of services, as well as ethics and The shareholders take part in partners’ independence. meetings and the general meetings. KPMG AB is the Swedish member firm of Partners’ meetings make decisions on, KPMG International, a Swiss co-operative KPMG International is led by the Global among other things, the selection of new that exists under Swiss law. KPMG in Council, Global Board and Global Manage- partners, members of the shareholders’ Sweden is owned by 99 accountants and ment Team. Further information on KPMG committee, the nominations committee advisers in the Swedish firm, which has International can be found in the KPMG and the firm’s funding. Decisions made at around 1,700 employees in total. International Transparency Report for Annual General Meetings include issues 2017. that are regulated under the Swedish KPMG AB is registered with the Swedish Companies Act, such as the election of the Supervisory Board of Public Accountants Total revenue from member firms of Board of Directors and the auditor, as well (RN) as an accounting firm and is thus KPMG International within the EU and as deciding on dividends to shareholders. permitted to carry out accountancy EEA for the statutory auditing of financial work. KPMG AB is also registered as statements amounted to EUR 2.7 billion Shareholders’ committee an accounting firm with the PCAOB in for the fiscal year ended 30 September The primary task of the shareholders’ the USA and the Financial Services 2017. This revenue is calculated based on committee is to deal with shareholder- Agency in Japan. average exchange rates for the 12 months related issues, including the distribution leading up to the end of the fiscal year on of shares in Bohlinsgruppen AB. The KPMG International 30 September 2017.1 shareholders’ committee works directly KPMG International has 197,000 employ- on behalf of the owners. ees in 154 countries and provides all A list of all member firms within the EU member firms with a vast international and EEA with fiscal years ending 30 June Nominations committee knowledge network. KPMG International 2017 or 30 September 2017 is available The task of the nominations committee is does not do any business with clients, here: List of KPMG audit entities located to nominate members for the Board of but is an umbrella organization for all in EU & EEA. Directors, the shareholders’ committee member firms in the network.

All of KPMG’s member firms offer their 1 This financial information represents combined information from individual KPMG firms in member states of the EU and EEA that perform professional services for clients. The information has been combined for presentation purposes only. KPMG International clients services in the areas of audit, tax does not perform any services for clients and thus has no revenue attributable to client engagements.

6 | TRANSPARENCY REPORT 2016/2017 Structure and governance

and the nominations committee, and also to nominate the Chairman of the Board Board of Directors and external auditors. The nominations committee works directly on behalf of the owners.

Board of Directors Every year, the Board of Directors confirms KPMG’s strategy, policy documents and general guidelines for the business. The Chairman of the Member Member Member Board of Directors also makes decisions Board Thomas Forslund Annika Melin Jakobsson Susann Lundström on systems and procedures for internal control. In addition, the work of the Board of Directors includes appointing the Senior Partner, submitting proposals of candidates for partners, drawing up guidelines for remuneration to partners and appointing from within members of the remuneration

committee, which deals with remuneration Member Member Member to and the discontinuation of partners, as Mattias Eriksson Joakim Thilstedt Fredrik Waern well as appointing members of the Board of Directors of BISFAB and subsidiary firms.

The Board of Directors for the 2016/2017 The management team financial year, appointed by the Annual General Meeting on 15 December 2017, is shown on the right.

The Senior Partner and the management team The Senior Partner is responsible for Senior Partner Business Area Business Area the operational business and appoints and Acting Business Manager, Advisory Manager, Tax the rest of the management team. Area Manager, Audit Jan Forsell Tina Zetterlund Company management consists of the Magnus Fagerstedt Senior Partner, Business Area Managers and the Director of Communication. Company management is responsible for implementing the business’s strategic direction and priorities once these have been decided by the Board of Directors. Company management is also responsible Market Segment Director of for the introduction and development of Manager, Small and Communication KPMG’s policies and guidelines for the Medium-Sized Björn Bergman business, as well as ongoing follow-up of Enterprises (SMEs) quality and control procedures. Patrik Anderbro

TRANSPARENCY REPORT 2016/2017 | 7 Our quality 4 assurance

An audit is a service in the public interest. International and its member firms, these ment with regard to quality, ethics and It is intended to quality-assure the financial regulations are combined with each integrity. Management’s attitude clearly information of firms and organizations for employee’s personal responsibility for risk shows what kinds of behavior are accepted. the benefit of owners, investors, banks management and quality assurance. This and other stakeholders. As a provider of involves a requirement to understand and Strategy audits and audit-related advice, we have observe the firm’s policies and in their It is clearly communicated to all a responsibility to clients, society and other day-to-day work perform engagements employees that quality is at the heart stakeholders to deliver credible work to on the basis of the procedures set out in of our business. a very high level of quality. the policies. As each employee is inde- pendent in each relationship and performs Responsibilities A high degree of credibility is crucial for engagements with integrity and impartial- We strive to have competent, experi- the industry, KPMG and the individual ity, confidence is maintained both in our enced employees in the right positions auditor and adviser. Credibility is based on own role and in the capital markets. who can affect quality in day-to-day work. factors such as a high level of expertise, integrity and good judgement. How we Key factors in our quality Whistleblowing control system appear and act in various situations KPMG has a clear reporting procedure affects how the world at large perceives through which employees can report any us and the degree of trust that we enjoy. breaches of the Code of Conduct and our Monitoring and Professional behavior in our contact with follow-up Management ethical rules. Questions and mandatory clients and in other contexts when we are responsibility notification cases relating to risk and representing our firm or our industry is ethics may be put directly to our Quality & therefore not merely a matter of how we Processes for Risk function. Employees and suppliers performing express ourselves and what we do. It is engage- Tone at can report suspected breaches anony- ments the top Ethical stan- also about being professional in the way dards mously using our international hotline. we do our job, and about satisfying our clients’ expectations of confidentiality. Management responsibility Procedures for Board of Directors and Senior Partner accepting clients Human and engage- Resource KPMG observes international Management The Senior Partner has overall responsibility standards for the level of quality in the business and The international quality standard that assumes responsibility for this work is relevant to auditing activities is the towards the Board of Directors. The International Standard on Quality Control The quality control system helps our Board of Directors is ultimately responsi- (ISQC1), issued by the International employees to act correctly in various bility for the structure and effectiveness Federation of Accountants (IFAC). There situations, to observe applicable laws of the quality assurance system. are also rules and standards issued by and regulations, and to meet professional the Swedish industry organization for requirements. Our quality work is under The Board of Directors’ ultimate responsi- accountants and advisers (FAR) as well constant evaluation and development bility for the quality control system is also as supervisory authorities such as the with the intention of guaranteeing high stipulated in ISQC1. Our corporate culture Swedish Inspectorate of Auditors (SIA) quality and adding value in what we do. is infused by a high level of commitment and the US Public Company Accounting to issues relating to quality. The Board Oversight Board (US PCAOB). These Tone at the top of Directors and the Senior Partner rules have been integrated into all of At the heart of the quality control system contribute both through existing processes KPMG’s business areas. Within KPMG are the attitude and behavior of manage- and in other ways to maintaining and

8 | TRANSPARENCY REPORT 2016/2017 enhancing our quality culture. The The Code of Conduct states that all of our Area managers provide support and importance of high quality is a consistent employees must: advice in all aspects of auditing, financial message in communication from man- reporting and regulatory requirements, • observe and apply all laws, regulations agement. as well as offering expert knowledge in and the content of KPMG’s policies various sectors. Risk & Compliance • report any breaches of law regardless of The quality control and risk management whether they were committed by KP- KPMG’s range of courses covers not system in KPMG is monitored by the MG’s employees, clients or a third party only auditing, accounting, tax and regula- Quality & Risk Management function, tory issues, but also a wide selection of • report any breaches of guidelines on risk comprising the Risk Management Partner other technical skills as well as business management committed by a KPMG and a risk management team. development, personal development and firm or its employees knowledge of our ethical rules of conduct. Our business areas • Not offer, promise, give, request or The managers of our business areas are accept bribes (either directly or through Authorization and accreditation responsible for the quality of services an intermediary). Our policies require that accountants and delivered within their respective areas, specialists achieve and maintain the and they report to the Senior Partner. Human Resource Management technical competence and experience Procedures have been drawn up within Our procedures, processes and programs that meet the requirements of current each business area for risk management, for recruitment and employee develop- legislation and other regulations. Our quality assurance, and follow-up and ment aim to attract, develop and manage auditors complete annual training programs control. These procedures are based on our employees in such a way that we and attend seminars to enhance their skills. the guidelines we have adopted for the make sure they have the knowledge, skills business. and other qualities necessary to perform Accountants who are responsible for their work. New employees take part in a signing audit reports must, among other Ethical standards comprehensive induction program that things, satisfy the requirements issued We have committed to maintaining a high includes ethics and independence. by FAR. Certain accounting and advisory ethical level in everything we do. KPMG’s services require special internal accredi- values encapsulate the high demands Engagement management tation and/or accreditation at individual we have of all our employees in terms Employees are assigned specific engage- level, which is the subject of a specific of performance and professionalism. ments based on competence, relevant control procedure. This applies, for Support is provided by such means as a professional and industry experience example, to audit clients reporting accord- Code of Conduct, about which employees and the nature of the engagement. The ing to US GAAP or US Auditing Standards, are informed. This is supplemented by a business area managers are responsible or financial companies. number of internal policies, such as the for the process of appointing account employee policy, working environment executives, and also for ensuring that policy, equal opportunity policy, quality the engagement teams have the right Employees per service area policy and environment policy. Policies competence and resources. are then translated into clear guidelines 8% 13% and procedures. Our value, “We act with Skills development At KPMG we continuously evaluate our integrity”, is fundamental in this respect. 20% Our values are communicated to all employees’ capacity and competence employees. They are also integrated into to carry out engagements in accordance the process through which employees’ with our high demands for professional- performance is evaluated and rewarded. ism. We want to give our employees 9% opportunities to develop both within their Our Code of Conduct contains all of 50% KPMG’s global values and the ethical area of competence and as an individual. standards that are expected to pervade All employees are offered opportunities all the actions we take as a firm and as for development within the framework Audit Tax employees. It emphasizes in particular of the business’s needs. Employees SME audit and Advisory that objectivity and independence are and managers work together to drive advisory services Support functions cornerstones of our business. the individual’s skills development.

TRANSPARENCY REPORT 2016/2017 | 9 Goals and follow-up least every three years and when circum- control quality, including for engagements Every year, goals are set for each employee stances change. The evaluation allows us that are of public interest. In accordance on the basis of KPMG’s business plan. Each to decide whether further control measures with good accounting practice, we are employee has a so-called Performance need to be taken for the engagement in obliged to quality-assure our reporting Manager, whose job it is to evaluate the question or future engagements. internally. One of the means of achieving employee’s work and performance on an this is through what is known as an ongoing basis over the year, and to follow Where our evaluation shows that we need Engagement Quality Control Reviewing up on the goals at the end of the year. to decline the engagement or the client Partner. The partner responsible for this The remuneration rules are linked to the relationship, internal consultation takes quality assurance studies audit planning, evaluation process. place to establish which legal and regula- implementation, KPMG’s reports and tory measures and steps need to be annual accounts, and submits his or her Selection of partners taken, and when required, we also own comments before the firm’s auditor The process for being accepted as a consult with our supervisory body. signs the audit report. If the audit team partner is wide-ranging and involves the identifies issues that require special management team, the Board of Directors Processes for performing engage- consideration, these must always be and partners’ meetings. All proposals for ments discussed with the Engagement Quality new partners are reviewed by the Board The foundation on which our delivery of Control Reviewing Partner. of Directors in accordance with a defined professional services to our clients is built process before being put before the comprises the quality controls that are part Internal consultation with colleagues is partners’ meeting. of the firm’s processes for performing an encouraged and, in some cases, is a engagement. These quality controls requirement. One important support Procedures for accepting clients and include follow-up on policies and proce- function in this respect is the Department engagements dures, the purpose of which is to help of Professional Practice (DPP), which To perform our tasks as accountants and to ensure that the work carried out by provides specialist support in the field produce the reports and service expected members of the engagement team of audit methodology and other issues by the client and the market, a check is complies with applicable professional that the audit team might encounter. All performed for each engagement via the requirements, laws and rules, as well as engagement teams also have access to global support system Sentinel™ to ensure satisfying internal quality requirements. support from KPMG’s Financial Reporting that there are no conflicts of interest in Group and KPMG International Standards relation to previous engagements or The following sections contain more Group, as well as support from SEC individual employees. The accountant’s detailed information about this, especially (Securities and Exchange Commission) independence is analyzed in system- about statutory accounting services. reviewing partners when auditing based procedures for the evaluation of SEC-registered firms and their related clients and engagements. Audit methodology companies. Our audit methodology, developed by The person appointed to be responsible for KPMG International, is based on the Integrated follow-up on quality and risk as well the client and engagement evaluates each requirements set out in the International as support processes potential assignment based on various Standards on Auditing (ISA). The method- criteria, such as the sector in which the ology is described in our “KPMG Audit company operates and the management’s Methodology” (KAM). The audit process Audit control system, which along with the is structured and requires active leader- Values nature of the assignment results in a risk ship by the engagement manager Tax profile. We do not accept clients or carry throughout the whole process. out engagements that do not meet the Tone at requirements of KPMG’s internal control, Mentoring, supervision and review of the top Advisory Engagement completed which also includes checks based on the engagement teams Follow-up requirements set in regulations on money Audit work is subject to special guidelines laundering and the financing of terrorism. regarding supervision, control and the use The evaluation is repeated for both client of specialist support. The guidelines also Tools and engagement at a frequency that is include in some cases requirements for a KPMG International provides a set of audit set on the basis of the risk profile, but at special engagement-based function to tools to support its audit methodology.

10 | TRANSPARENCY REPORT 2016/2017 each three-year period, all of KPMG’s further development of the high level of partners are subject to a Quality Perfor- quality that is a prerequisite for KPMG’s mance Review. Other qualified accoun- business and to protect the KPMG brand tants follow a nationally defined cycle by dealing with any deviations from what for quality control. is considered acceptable behavior in employees in the situations just described. 74.3 • The Risk Compliance Program is an annual self-evaluation scheme that aims Client satisfaction has Feedback from clients to guarantee the effectiveness of internal We conduct interviews with our clients controls relating to issues of risk and increased since last year, on an ongoing basis in order to guarantee independence. Independent reviewers a high level of quality in our work. These (73.3) according to the examine this work in order to verify that interviews are conducted by senior policies, processes and effective people within KPMG or by people who are Swedish Quality Index controls have been implemented and independent of KPMG. Our client’s views are being observed. and assessments thus become a part of • KPMG International conducts regular our continuous learning process and These tools promote a consistent applica- Global Compliance Reviews and so- development. tion of the audit process globally and thus called Country Performance Reviews of contribute to the quality of the audit. national member firms. In order to be Supervision by the Swedish Inspectorate KPMG’s electronic audit tool, eAudIT, able to operate under KPMG’s name, a of Auditors provides the methodology, guidance and national member firm must show that KPMG is a registered accounting firm industry support required to conduct an they adhere to work methods defined and is therefore subject to supervision effective audit of the highest quality. and approved by KPMG, that training by the Swedish Inspectorate of Auditors. eAudIT is based on the solid experience activities maintain a defined level, that The Swedish Inspectorate of Auditors that KPMG already possesses, but also to there is sufficient support from specialist (SIA) is the control body for auditors under a large extent on innovation. eAudIT gives employees and that the Quality Perfor- the Swedish Auditors Act 2001:883 and us the opportunity to provide an effective, mance Review and the Risk Compliance conducts ongoing controls of both auditing well-coordinated audit for our clients. Program are being conducted in an activities and auditors. SIA’s quality control appropriate way. The controls are con- takes the form of an annual review of Monitoring and follow-up ducted by senior partners from countries audits performed on public interest We satisfy ISQC1 monitoring requirements outside the country being checked. entities by the firm’s auditors, and also by means such as an annual quality control checks the firm’s own systems for as well as an annual review by an internal • Using a traffic light model, each em- general control and ongoing quality Risk Compliance Program. We are also ployee is given confirmation annually of controls. The last reported quality control subject to quality controls performed by their personal compliance within 13 started in October 2014 and ended in FAR and the Swedish Inspectorate of measured areas, such as completing December 2015 with a decision on Auditors (SIA). In addition, we fall under mandatory training on time and report- 22 December 2015. The decision and the supervision of the PCAOB (US) and the ing financial interests correctly and report are available to the public on Certified Public Accountants and Auditing within the time limits. the Swedish Inspectorate of Auditors’ Oversight Board (CPAAOB) in Japan. • The Board of Directors has established a website, www.revisorsinpektionen.se. disciplinary committee to make deci- The quality of our work is followed up on sions on disciplinary action in connec- The most recent control by the PCAOB an ongoing basis through various quality tion with any breaches relating to the was conducted in fall 2014 and was control programs within KPMG: rules on independence. The members reported to KPMG on 21 December 2015. of the committee are appointed by the • Annual quality controls of auditing and A final follow-up report, dated 6 July 2017, Board of Directors, which also confirms advisory engagements are conducted was received in August 2017. via KPMG’s global Quality Performance the rules on work and discipline that govern the committee’s work. Review. Engagements are selected The report states that the measures at random and the quality control is • The quality committee, which is also KPMG has taken based on the PCAOB’s conducted by reviewers who are appointed by the Board of Directors, previous reporting have been implemented independent of the engagement. Within serves to promote the maintenance and satisfactorily.

TRANSPARENCY REPORT 2016/2017 | 11 5 Our independence

100% 100% of our employees have completed the training program

procedure known as preapproval of engagements. This means that the account executive and, if relevant, the client’s audit committee must have submitted a pre-approval before an engagement can be started.

Independence checks are also a pre- KPMG guarantees independence promise confidence in the auditor’s ability requisite when tendering to audit a listed Impartiality, independence and an ethical or desire to perform the audit engagement company, or where an existing audit client approach are the cornerstones of our with impartiality and independence. If this becomes a public interest entity (PIE). accounting practice. KPMG’s Ethics & analysis identifies any circumstances that Control takes place according to a special Independence function has overall might represent an unacceptable threat to process known as Independence Clear- responsibility for issues of professional the auditor’s independence, we decline ance and is carried out via the KPMG ethics within the firm. Our system for the engagement. An additional review is Independence Checkpoint – IT support guaranteeing independence in our conducted before the audit report is that was implemented in 2016. accounting business includes not only submitted, in which consideration is given measures within the individual engage- to other engagements conducted for the Not only must KPMG as a firm maintain ment, but also firm-wide measures. client during the financial year. All engage- its independence in relation to our audit ments are preceded by a check to ensure clients; all our employees have to do What is referred to as the analysis that there are no conflicts of interest with the same. Any financial interests of the model is mandatory in engagement other engagements. For all audit clients company or the individual employee that activities. This means that, before starting that are SEC-registered, publicly listed might constitute a threat to the auditor’s work on an engagement for an audit or firms and their subsidiaries and associated independence are monitored via a system assurance client, we check whether there firms, and a large number of other interna- support function (KICS) that covers all of are any circumstances that might com- tional firms, KPMG applies a policy-based KPMG’s audit clients throughout the world.

12 | TRANSPARENCY REPORT 2016/2017 Any employee in a position involving for a period of two years (cooling off • Expanded reporting by the auditor, leadership is to check via KICS whether period). Equivalent rotation requirements through the audit report and to the audit a planned acquisition of securities is also exist for Engagement Quality Control committee. permitted. Securities acquired by our Reviewing Partners, among other things. firm, the employee or persons related to KPMG’s Quality & Risk Management them are registered and monitored in EU regulation function monitors compliance with the case the holding should become no On 17 June 2016, the EU’s regulation on rotation requirements for auditors select- longer permitted. In this event the holding specific requirements regarding statutory ed and for our firm, as well as other must be sold within five working days audit of public interest entities entered independence requirements. into force – the EU Audit Reform. In brief, With a few specific exceptions, employ- the regulation involves: Areas to consider ees working on engagements are pre- • The category of public interest entities The reason for our rules of conduct vented from taking up board positions. (PIEs) has been expanded in scope, to regarding independence is that we As with discussions concerning taking up include financial institutions as well as conduct auditing activities and must employment with an audit client, such companies with securities listed for therefore safeguard our auditors’ inde- positions must be reported and approved trading on a regulated market. pendence and impartiality – referred to in by our Ethics & Independence function. everyday terms as the auditor’s indepen- • Mandatory rotation also covers certain We check compliance with these dence. We have to observe not only other key auditors such as auditors of procedures continually. actual independence, but also perceived significant subsidiaries. Mandatory independence in areas other than the rotation of audit firms at least every ten All new employees complete mandatory client relationship. The matter of indepen- years. In the case of non-financial training in professional ethics during their dence is also considered in other areas, institutions, this can be extended in first week with KPMG. All employees such as services, purchasing and other certain circumstances. subsequently receive annual training in business relations. Before an agreement matters concerning ethical principles and • The regulation states certain non-audit is concluded with a new supplier, a check independence. services that the audit firm is prohibited is performed on whether the firm is an from providing to audit clients that are audit client of KPMG, and whether this Our employees are trained in our Code public interest entities. Permitted might threaten our independence. Rela- of Conduct and in applicable laws and services must be approved in advance tionships such as sponsorship and distri- regulations, such as bribery legislation, by the client’s audit committee. bution or marketing agreements etc. are the Money Laundering Act, insider rules • The volume of non-audit services is similarly checked. and in KPMG’s internal rules and stan- limited by a fee cap for public dards. New employees complete such interest entities. mandatory training within two months of starting employment.

New employees confirm via their of employment that they can and will Professional Services and comply with the rules on independence. appearance purchases In each subsequent year, all employees submit a declaration of compliance with policies and with rules on professional ethics, information security and knowledge management. We have system support functions and processes to monitor and Supplementary maintain our independence. These systems Client engagement for audit client manage and monitor all issues relating to relationship independence in our engagements.

Rotation Appointment A person who has been the elected auditor of a public interest entity for seven years may not take part in the audit

TRANSPARENCY REPORT 2016/2017 | 13 Principles of remu- 6 neration to partners

Remuneration to partners is based on the taken into consideration. The evaluation Guiding Principles defined annually by the process includes a self-assessment, Board of Directors. The Guiding Principles appraisal by a nominated senior partner are based on the strategy established by and calibration at a Business Unit and the Board and on KPMG’s long-term company level. Evaluation of quality and goals. Remuneration to partners is based independence is a particularly important on the key areas evaluated, which are component. The remuneration commit- quality, leadership, marketing and profit- tee, which is a sub-committee of the ability, as well as the roles and responsi- Board of Directors, takes the final decision bilities that the partner has. In accordance on remuneration. A partner’s remunera- with the applicable rules, auditors are not tion consists of several components: remunerated for other services sold to salary, profit-sharing, pension contri- audit clients and therefore these are not butions and other benefits.

14 | TRANSPARENCY REPORT 2016/2017 7 Financial information

Net revenue KPMG

Mkr Net revenue for the financial year

2500 2016/2017 was SEK 2,383 million, representing an increase of 7% 2000 compared with the previous 1500 financial year. 1000

500

0 11/12 12/13 13/14 14/15 15/16 16/17

Net revenue breakdown as per EU auditing rules

Mkr 1000 Auditing of public interest entities (PIEs)

800 accounted for 10% of the group’s net revenue and auditing of other companies for 600 35%. The growth has mainly taken place on 400 the advisory side. Other permitted services

200 for companies that are audit clients have grown by nearly 8 percent since the last 0 11/12 12/13 13/14 14/15 15/16 16/17 fiscal year. Other consulting services have increased by 23 percent since last year. Auditing of public interest entities (PIEs) Auditing of non-public interest entities (non-PIEs) Other permitted services to companies which are audit clients Other services

Equity/assets ratio

% The equity/assets ratio was just under 40 34 percent at 30 September 2016 and 35 30 has been gradually recovering over the 25 past three fiscal years. This is an 20 increase of 2.4 percentage points 15 10 compared with the same date the 5 previous year. 0 11/12 12/13 13/14 14/15 15/16 16/17

TRANSPARENCY REPORT 2016/2017 | 15 Audit clients 8 that are public interest entities (PIEs)

In accordance with the EU’s 8th Directive, below we present our audit clients as of 1 November 2017 that are public interest entities as defined by EU legislation.

OMX Large Cap Concentric AB MIPS AB Ahlsell AB (publ) Eastnine AB (publ) MQ Holding AB Alfa Laval AB Ferronordic Machines AB MSC Group AB BillerudKorsnäs AB Hansa Medical AB Prevas AB Bravida Holding AB Hoist Finance AB Strax AB Com Hem Holding AB Humana AB Fingerprint Cards AB Investment AB Öresund Companies with listed loans Hemfosa Fastigheter AB Inwido AB Akademiska Hus AB Holmen AB Lagercrantz Group AB Alfa Laval Treasury International AB Hufvudstaden AB Momentum Group AB Ampla Kapital AB ICA Gruppen Aktiebolag OEM International AB Apikal Fastighetspartner AB (publ) Lundbergföretagen Aktiebolag, L E NP3 Fastigheter AB Energa Finance AB (publ) Modern Times Group MTG AB Opus Group AB Galliaden Holding AB (publ) NIBE Industrier AB Qliro Group AB Humlegården Fastigheter AB (publ) Peab AB Xvivo Perfusion AB Intea Fastigheter AB (publ) Sandvik AB LSTH Svenska Handelsfastigheter AB ÅF AB OMX Small Cap Länsförsäkringar AB Actic Group AB NorCell Sweden Holding 3 AB OMX Mid Cap Active Biotech AB ORLEN Capital AB (publ) Acando AB Avega Group AB PGE Sweden AB (publ) AddLife AB B3IT Management AB PKO Finance AB (publ) Addtech AB BioInvent International AB PostNord AB AQ Group AB Concordia Maritime AB PZU Finance AB (publ) Bergman & Beving Aktiebolag Episurf Medical AB Strömma Turism & Sjöfart AB Bilia AB eWork Group AB Vacse AB Cloetta AB (publ) FM Mattsson Mora Group AB Velcora Holding AB

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16 | TRANSPARENCY REPORT 2016/2017 Banks, insurance companies, etc. Häradssparbanken Mönsterås Placerum Kapitalförvaltning AB under the supervision of FI, Sweden’s Audit clients financial supervisory authority. ICA Banken AB Preem Försäkrings AB AK Nordic AB ICA Försäkring AB Remium Nordic AB that are public interest entities (PIEs) Alfa Laval Försäkrings AB Kommungaranti Skandinavien SABO Försäkrings AB (publ) Försäkrings AB Saco Folksam Försäkrings AB BMW Financial Services Scandinavia AB Kommuninvest i Sverige AB Sandvik Försäkrings AB Brummer Life Försäkringsaktiebolag KPA Livförsäkring AB (publ) Sappisure Försäkrings AB Dina Försäkring AB KPA Pensionsförsäkring AB (publ) SevenDay Finans AB Dina Försäkringar Göteborg Kyrkans Försäkring AB (publ) Sparbanken Boken Dina Försäkringar Skaraborg-Nerike Landstingens Ömsesidiga Sparbanken Tanum Dina Försäkringar Sydost ömsesidigt Försäkringsbolag Svenska Kommun Försäkrings AB Dina Försäkringar Sydöstra Norrland LMG Försäkrings AB Sörmlands Sparbank ömsesidigt Länsförsäkring Kronoberg Tre Kronor Försäkring AB Dina Försäkringar Väst Länsförsäkringar Bank Aktiebolag (publ) Trygg-Hansa Ömsesidig Dina Försäkringar Västra Hälsingland Länsförsäkringar Blekinge Livförsäkring i likv Dalarna Länsförsäkringar Fondliv Försäkrings- Twincap Försäkrings AB EnterCard Holding AB aktiebolag (publ) Wasa Kredit AB EnterCard Sverige AB Länsförsäkringar Gotland Westra Wermlands Sparbank ERV Försäkringsaktiebolag (publ) Länsförsäkringar Grupplivförsäkrings- Visenta Försäkringsaktiebolag aktiebolag Folksam Fondförsäkrings- Volvofinans Bank AB aktiebolag (publ) Länsförsäkringar Gävleborg Åse Viste Sparbank AK Nordic AB Folksam LO Fondförsäkrings- Länsförsäkringar Göinge – Kristianstad aktiebolag (publ) Länsförsäkringar Halland Folksam ömsesidig livförsäkring Länsförsäkringar Hypotek AB (publ) Folksam ömsesidig sakförsäkring Länsförsäkringar Jönköping Fryksdalens Sparbank Länsförsäkringar Liv Försäkrings- aktiebolag (publ) Förenade Liv Gruppförsäkring AB (publ) Länsförsäkringar Sak Försäkrings- Förenade Småkommuners aktiebolag (publ) Försäkrings (FSF) Aktiebolag Länsförsäkringar Skaraborg – ömsesidigt Försäkringsaktiebolaget Agria (publ) Länsförsäkringar Skåne – ömsesidigt Försäkringsaktiebolaget Bostadsgaranti Länsförsäkringar Uppsala Försäkringsbolaget PRI Pensionsgaranti, ömsesidigt Länsförsäkringar Älvsborg

Gamla Livförsäkringsaktiebolaget SEB Länsförsäkringar Östgöta Trygg Liv (publ) Mondux Sverige AB Hoist Kredit Aktiebolag OK-Q8 Bank AB Holmia Livförsäkring AB Peab Försäkrings AB

TRANSPARENCY REPORT 2016/2017 | 17 Declaration of effectiveness in the quality control system

This report describes, among other things, the quality assurance system that we use in our auditing activities.

Our quality control framework supports our employees and enables them to act with integrity and independence, and to observe applicable laws and regulations so that we maintain the trust of the general public and stakeholders.

The results from our internal monitoring programme (locally and globally), including controls in respect of impartiality and independence together with the feedback received from independent inspection bodies, provides the basis required for being able to draw the conclusion that our quality control systems are working effectively.

Stockholm, 30 January 2018

Magnus Fagerstedt Senior Partner

18 | TRANSPARENCY REPORT 2016/2017

KPMG

Visiting address: Evenemangsgatan17, Solna Postal address: P.O. Box 3018 SE-169 03 Solna

Visiting address: Vasagatan 16, Stockholm Postal address: P.O. Box 382 SE-101 27 Stockholm

Tel: +46 (0)8-723 91 00 E-mail: [email protected]

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The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

© 2018 KPMG AB, a Swedish company and a member firm of the KPMG network of independent member firms affiliated with KPMG International (“KPMG International”), a Swiss entity. All rights reserved. Normy/1803/E