Post date: Apr 23, 2013 10:10:54 AM
Reuters Business Video Report - REUTERS REPORTER, JANE LANHEE LEE,
"Big audit firms once again in the firing line. KPMG has been hit by an insider trading scandal after one of its partners allegedly sold confidential information on clients. That's renewed calls for tougher industry oversight. I asked global chairman Michael Andrew on his visit to Shanghai how the company is coping with the crisis."
CHAIRMAN, KPMG INTERNATIONAL, MICHAEL ANDREW,"Well first of all, I think the scandal is somewhat overrated. It's a strange connection. They have one aberrant individual, then say there needs to be policy change of this sort of nature. Basically, it's a question for countries around the world and some countries the personal auditor does sign the accounts, in others the firm signs the accounts. It makes no difference at the end of the day to the outcome for investors."
REUTERS REPORTER, JANE LANHEE LEE,
"So you're view for the U.S. market is that it's not that important?"
CHAIRMAN, KPMG INTERNATIONAL, MICHAEL ANDREW,
"I don't think it's important. I think it is quite misleading. I think there are much more fundamental things that need to be done to restore confidence to investors, than just having the individual partner designated on the account sign his name."
REUTERS REPORTER, JANE LANHEE LEE,
"In terms of the scandal though, it is one rogue individual. But rogue individuals exist everywhere and they sink banks sometimes as well. So how do you make sure that that doesn't happen again?"
CHAIRMAN, KPMG INTERNATIONAL, MICHAEL ANDREW,
"Well, it's something we think about deeply and it's amazing how much just one rogue individual can impair such a good quality global brand. At the end of the day, I think it just comes down to culture and just making sure in the organisation you understand that you have a greater public interest. And you put people into senior positions of responsibility who understand this at the end of the day. In the end it was quite easy to deal with, because once you knew that was totally not aligned to our values, we took decisive steps, we separated the partner and basically we withdrew our accounts and we acted responsibly. I think at the end of the day, even the regulators believe that we actually acted properly under these circumstances."
(SOUNDBITE) (English) REUTERS REPORTER, JANE LANHEE LEE, SAYING:
"But is it difficult to weed out the rogue people in advance? Is that something that any firm is always exposed to?"
CHAIRMAN, KPMG INTERNATIONAL, MICHAEL ANDREW,
"Jane, we have 156,000 people in the organization. There's always going to be one or two that don't do the right thing. So you need controls in place. So in terms of our actual duty to our clients, we make sure we do what we call 'four-eye' reviews. So nothing goes out without people checking this. This was something where the individual was personally benefitting himself. I don't know what controls you can actually put in place around that. If people have good ideas, then we'd be the first to know. We actually have a system at the moment where people have to actually register all the investments they hold across the world, to make sure we are not in conflict, that we are actually independent. So we probably have the world's leading systems already in this place, but they are never going to stop bad behavior from one aberrant individual."
REUTERS REPORTER, JANE LANHEE LEE,
"What's been the impact on the brand KPMG? Are some of the clients walking away or is it more difficult to get business because people are afraid?"
CHAIRMAN, KPMG INTERNATIONAL, MICHAEL ANDREW,
"Actually, quite the reverse. I think most of our client calls have been, 'thank you, you've shown some leadership on this. You've actually had a problem in your organization, you've dealt with it decisively, swiftly and that's the sort of organization we want to deal with.' I mean it's incredibly disappointing to me. We have the best global brand. We have almost no litigation, no regulatory issues around the world now for almost 5-10 years and here we are. One individual can basically raise this sort of circumstance."