Jiten Kotecha spent five years at KPMG, from 2013 to 2018, working as an Employment Lawyer before moving to Cummins. We have already opened two cupboards from that period: KPMG advising employers about gender pay gaps while publishing a substantial one of its own, then KPMG collecting roughly £29 million auditing Carillion across nineteen years without a qualified opinion. For the finale, TCAP went back for the rest of the building. What we found was Quindell, Ted Baker, Conviviality, Revolution Bars, an “unacceptable deterioration” in audit quality, false and misleading material supplied to the regulator, and separate KPMG member firms overseas generating their own spectacular regulatory shitshows. At some point, “professional scepticism” stops sounding like a professional standard and starts sounding like the name of the bastard who never turned up for work.
There is a particular genius to the Big Four business model. You build an institution around trust, independence, expertise, professional judgement and risk management, then charge corporations enormous sums for access to those virtues. The client gets a prestigious logo, clever people, several hundred pages of methodology and the comforting knowledge that somebody with expensive qualifications has crawled underneath the corporate machinery with a torch.
KPMG was very good at selling that promise. Its auditors were supposed to challenge management. Its advisers helped companies navigate regulation. Its lawyers explained compliance. Its risk specialists presumably knew what risk looked like, which is useful because during Jiten Kotecha’s five-year stint the firm accumulated enough regulatory warning signs to decorate a fucking aircraft carrier.
This finale is not an allegation that Kotecha personally performed any of the audits, prepared any disputed working paper or participated in any of the misconduct described below. His recorded role was employment law. Jiten’s Jobs is examining the professional institutions on his CV because TCAP regards his present role at Cummins as deeply dishonourable, and prestigious employer names deserve rather more inspection than the reverential polishing they usually receive.
So this time we are not admiring the KPMG logo.
We are lifting the drain cover.
Five Years Inside The Confidence Factory
Kotecha’s public career history places him at KPMG from 2013 until 2018 as an Employment Lawyer, with work including employment matters and gender pay gap reporting. That is five years inside one of the largest professional-services machines on Earth, an organisation whose product ultimately depends upon a deceptively simple commodity: people believing that KPMG knows what the hell it is doing.
That belief matters particularly in audit. Auditors do not manufacture the company’s products, run its factories or manage its employees. Their value lies in independent scrutiny. They test evidence, interrogate assumptions, challenge management and provide assurance that financial statements can reasonably be trusted.
Consequently, “professional scepticism” appears again and again in audit regulation. It is the intellectual crowbar that is supposed to stop an auditor becoming a highly trained nodding dog. Management says something, the auditor asks why. Management produces evidence, the auditor tests it. Something smells peculiar, the auditor does not spray the room with consultancy-grade air freshener and declare the odour strategically aligned.
Then came Quindell.
Quindell: Welcome To 2013
KPMG became Quindell’s auditor in 2013, the same year Kotecha’s five-year spell at KPMG began. When the Financial Reporting Council eventually dealt with that audit, KPMG and audit engagement partner William Smith admitted misconduct. The regulator imposed a £4.5 million fine on KPMG, reduced to £3.15 million for settlement, plus £146,000 towards the FRC’s costs.
The underlying failures are the interesting part. According to the regulator, KPMG failed to obtain reasonable assurance that the financial statements as a whole were free from material misstatement, failed to obtain sufficient appropriate audit evidence and failed to exercise sufficient professional scepticism. The problem areas included revenue recognition for legal services and transactions involving software licences, related services and investments.
That is a magnificent opening exhibit because it removes the need for TCAP to manufacture colourful language. An audit firm exists to obtain evidence and provide assurance. The regulator subsequently records failures involving evidence, assurance and scepticism. It is rather like discovering that the parachute factory has been reprimanded for persistent weaknesses involving silk, string and the general concept of not hitting the ground at terminal velocity.
Quindell subsequently made prior-year adjustments in the relevant areas. Meanwhile, KPMG had already supplied the unqualified audit opinion for 2013. The expensive professional gatekeeper had inspected the gate, polished the hinges and apparently misplaced the bloody crowbar.
Professional scepticism, my arse.
Ted Baker: Independence Goes Shopping
If Quindell was about audit evidence and scepticism, Ted Baker supplied a different flavour of bollocks. KPMG audited Ted Baker for financial years ending in January 2013 and January 2014. It also provided expert witness services to Ted Baker in a Commercial Court claim.
The FRC later concluded that this breached ethical standards and led to KPMG losing its independence for the audits. The regulator identified an unacceptable self-review threat because the audit team risked reviewing work performed by KPMG’s own expert. There was also a self-interest threat because the fees from the expert engagement significantly exceeded the audit fees, and KPMG and the engagement partner failed properly to consider it.
KPMG received a £3 million fine, discounted to £2.1 million for settlement, a severe reprimand and a £112,000 costs bill. The FRC did not allege that KPMG or the engagement partner actually lacked objectivity or integrity. It did not need to: the admitted misconduct was that the safeguards designed to protect the appearance and reality of auditor independence had been buggered sufficiently for the regulator to sanction the firm.
There is a wonderfully arse-backwards quality to this. Independence is not some decorative ethical garnish sprinkled over an audit after the numbers are finished. It is part of the reason anyone should trust the opinion in the first place. If the same professional-services machine starts producing work that another part of the machine must independently examine, the words “self-review threat” stop being compliance jargon and become a description of the corporate centipede disappearing up its own backside.
By August 2018, when the Ted Baker sanction was announced, Kotecha’s KPMG chapter was approaching its end.
The regulator, however, was only warming up.
Half The FTSE 350 Audits Inspected Needed More Than Limited Improvement
June 2018 delivered the sort of performance review that would make a quality director consider hiding in a stationery cupboard. The FRC published its Big Four Audit Quality Review results and said there had been an “unacceptable deterioration” in quality at one firm.
KPMG.
Half of the KPMG FTSE 350 audits inspected required more than limited improvements. The previous year the figure had been 35 per cent. As a result, the regulator put KPMG under increased scrutiny, including inspecting 25 per cent more of its audits during the following cycle and monitoring implementation of its Audit Quality Plan.
There is no need to inflate that finding. Fifty per cent already arrives wearing hobnail boots. These were FTSE 350 audits, exactly the kind of heavyweight corporate work for which Big Four prestige is supposed to justify Big Four fees, yet half of the KPMG audits inspected landed outside the regulator’s “no more than limited improvements” category.
KPMG itself acknowledged that its efforts had not been sufficient. The FRC said it would hold the firm’s new leadership accountable for improvement. Somewhere beneath all the corporate language, therefore, the message was refreshingly simple: the watchdog had looked inside the confidence factory and decided too much of the machinery was producing dodgy-looking widgets.
The quality-control canary was not coughing.
The poor bastard was face-down in the cage.
Conviviality: A Drinks Business, A Hangover And £3.01 Million
Conviviality provides another particularly ugly entry because the relevant audit work sits squarely inside Kotecha’s KPMG years. The drinks business grew rapidly through acquisitions, KPMG audited it, and Conviviality entered administration on 5 April 2018.
Years later, the FRC imposed sanctions over KPMG’s 2017 and 2018 audits. KPMG received a £4.3 million financial sanction, reduced to £3.01 million for admissions and early disposal, together with a severe reprimand and regulatory requirements aimed at preventing recurrence. The regulator described the 2017 failures as serious and spanning several significant areas of the financial statements.
The shopping list is quite something. KPMG admitted failures concerning risk assessment and fraud risk, sufficient appropriate evidence for £5.9 million of accrued franchise licence revenue, a third-party wine-supply contract, capitalised costs, exceptional items, supplier income and goodwill impairment. The FRC also identified failures to apply sufficient professional scepticism in several of those areas and failures in audit documentation.
This was not one decimal point wandering drunkenly into the wrong spreadsheet cell after lunch. Revenue, contracts, costs, supplier income, goodwill, fraud risk, documentation and scepticism were all wandering around the same regulatory crime scene looking for their coats. The FRC said the deficiencies involved fundamental auditing standards.
For clarity, the regulator said these breaches were not intentional, dishonest, deliberate or reckless. That distinction matters. It also leaves KPMG with the less glamorous explanation that a major professional-services firm managed serious audit failures across multiple important areas without needing anybody to deliberately sabotage the bastard.
Sometimes the cock-up is the story.
Revolution Bars: Another Round Of Scepticism
Then there is Revolution Bars Group. KPMG’s audits for 2015 and 2016 later attracted sanctions after failures involving supplier rebates and listing fees, share-based payments and, for 2016, deferred taxation. The company’s financial statements contained misstatements requiring correction, some of which were material to the financial statements as a whole.
KPMG received a £1.25 million sanction, discounted to £875,000, along with a severe reprimand. More brutally, the FRC said the audits failed to achieve their principal objective of providing reasonable assurance that the financial statements were free from material misstatement.
Read that again without the accounting vocabulary. An audit has a principal job. The regulator said these audits failed to achieve it.
The supplier-rebate failures are especially delicious because regulators had already warned auditors that complex supplier arrangements presented a particular audit risk. Yet failures persisted over two successive audit years and again included insufficient professional scepticism. KPMG was subsequently required to analyse the underlying causes and implement measures intended to stop the same sort of mess recurring.
By this stage “root cause analysis” begins sounding less like a regulatory remedy and more like KPMG’s most reliable repeat customer.
Then The Working Papers Started Biting The Regulator
Carillion has already had its own TCAP article, so there is no need to reheat the £29 million audit-fee story. There is, however, a completely separate Carillion-related episode so grotesque that leaving it out of the KPMG finale would amount to journalistic malpractice.
The FRC conducts Audit Quality Reviews by examining audit work. That system depends rather obviously upon the regulator receiving accurate information about what work existed, when it was created and what auditors actually did. Otherwise an audit inspection becomes regulatory theatre performed against scenery supplied by the people being inspected.
The later disciplinary case concerning KPMG’s Regenersis and Carillion Audit Quality Reviews found misconduct involving false and misleading information and documents supplied to the FRC. In the Regenersis matter, the tribunal found that a false or misleading goodwill working paper had been created and that false representations were made about audit work. It found deliberate and, for the relevant individuals, dishonest misleading of the inspectors.
The Carillion inspection produced another sewer pipe. The tribunal dealt with false or misleading meeting minutes and an audit working paper concerning the selection of construction contracts, together with false or misleading representations about when and how material had been created. Findings against particular individuals differed, including findings of dishonesty against some and lack of integrity without dishonesty against others.
KPMG admitted liability for the acts of the individuals and admitted that those acts amounted to misconduct. The firm was fined £20 million, reduced to £14.4 million for self-reporting, cooperation and admissions, and agreed to pay £3.95 million towards Executive Counsel’s costs plus the tribunal’s costs. It was also severely reprimanded and ordered to appoint an independent reviewer.
To KPMG’s credit, the firm itself brought the misconduct to the FRC’s attention, cooperated and took remedial action. The tribunal treated those steps as significant mitigation. Unfortunately, mitigating the aftermath does not make the underlying spectacle any less jaw-dropping: people inside one of Britain’s premier audit firms were found to have participated in providing false or misleading material to the body inspecting audit quality.
This is where satire becomes almost redundant. The regulator comes to inspect the inspectors, and the material presented to the regulator itself becomes the subject of misconduct findings.
That is not the fox guarding the henhouse.
That is the fox submitting revised chicken inventory schedules to Quality Assurance.
The Regulator Actually Had To Explain Honesty
The tribunal’s language deserves attention because it slices through the professional-services fog. Discussing the misconduct, it said no accountant should require education or training to realise that deliberately misleading someone, particularly a regulator, is incompatible with integrity and, barring special circumstances, dishonest.
Think about the institutional absurdity required to reach that sentence. This was not a primary-school ethics lesson. The audience consisted of professional accountants operating inside KPMG, a firm selling assurance, governance, risk, compliance and professional judgement to some of the most sophisticated organisations in the economy.
Yet the regulatory record eventually required the written equivalent of: do not bullshit the regulator.
There are expensive consultancy decks explaining culture. There are ethics frameworks, quality-control systems, professional standards, training programmes, governance structures and enough internal policy documents to stun a rhinoceros. Then, somewhere at the bottom of the pyramid, the regulator has to explain that deliberately misleading the people checking your work is bad.
You could not make this shit up without an editor accusing you of laying it on too thick.
Meanwhile, The Blue Logo Was Having Problems Overseas
KPMG’s international structure matters here. KPMG UK, KPMG US, KPMG South Africa and other member firms are legally distinct entities within the KPMG network. Kotecha worked for KPMG in Britain, not the American or South African member firms, and TCAP is not pretending liabilities magically teleport between separate legal entities because the stationery matches.
The network relationship is nevertheless real. KPMG’s own reporting explains that member firms operate under the common KPMG network, policies, quality standards, global methodologies and brand. KPMG International exists partly to facilitate those standards and protect and enhance the KPMG name.
That makes what happened elsewhere relevant as brand context rather than evidence against KPMG UK or Kotecha personally. Unfortunately for the brand department, the international context during roughly the same era was not exactly a fucking spa weekend.
KPMG South Africa became engulfed in controversy over its work for Gupta-linked entities and a report prepared for the South African Revenue Service. A KPMG International investigation found no evidence that KPMG South Africa partners or staff had participated in illegal activity or corruption through the work reviewed. What it did find was still savage enough.
KPMG said its South African firm should have stopped providing services to the Guptas much earlier. It found that audit work for Gupta entities had, in certain instances, fallen well short of expected quality. It said no KPMG South Africa partner should have attended the Gupta wedding in 2013, and it concluded that SARS should no longer rely on the executive summary of the relevant report containing conclusions, recommendations and legal opinions.
Leadership changes followed. KPMG South Africa subsequently described the Gupta entities, SARS work and another matter involving VBS Mutual Bank as separate incidents requiring investigation and remediation.
Different legal entity.
Same blue logo.
Awkward bastard of a coincidence for the brand manual.
America Finds The Answer Sheet
Then KPMG US decided that ordinary regulatory embarrassment lacked sufficient theatrical ambition.
In January 2018, US prosecutors announced charges arising from a scheme involving confidential information about which KPMG audits the Public Company Accounting Oversight Board planned to inspect. A former KPMG partner had already pleaded guilty. The alleged objective was breathtakingly straightforward: obtain confidential inspection information and use it to improve KPMG’s inspection results.
The SEC subsequently went further. In 2019 it charged KPMG US with altering past audit work after receiving stolen information about forthcoming PCAOB inspections. The SEC also found that numerous KPMG audit professionals cheated on internal training examinations by sharing answers and manipulating test results.
This is the point where the metaphorical building catches fire, the sprinklers start dispensing petrol and somebody from Risk Management arrives carrying a certificate saying the flames have completed mandatory e-learning.
According to the SEC, some professionals manipulated the internal exam system so they could lower the passing threshold. At times, people achieved passing scores while answering fewer than a quarter of the questions correctly. Lead audit engagement partners were among those found to have shared or solicited answers.
KPMG US agreed to pay a $50 million penalty, admitted the facts in the SEC order and accepted extensive remedial requirements. Again, this was KPMG US, a separate member firm, not KPMG UK and not Jiten Kotecha.
Nevertheless, behold the global brand proposition in all its motherfucking majesty: a professional-services network selling organisations expertise, integrity, assurance and training while one member firm ends up paying $50 million over stolen regulator information and people cheating on the training exams.
Somewhere, a PowerPoint died of shame.
Separate Firms, Shared Brand
The distinction between member firms cannot simply be waved away. KPMG says each member firm is legally separate and responsible for its own obligations and liabilities. That is the correct legal and corporate position, and TCAP is not going to turn a network into one imaginary multinational partnership because it makes the rhetoric easier.
But neither should the network disappear whenever the shared brand becomes inconvenient. KPMG’s own material says member firms commit to common policies, quality standards, strategies, methodologies and values. KPMG International exists partly to protect and enhance the KPMG name.
That is the commercial bargain. The blue logo carries accumulated prestige across borders because clients recognise KPMG rather than having to investigate the constitutional plumbing of every member firm before walking into reception. Brand value travels easily.
Consequently, brand embarrassment gets a passport too.
KPMG South Africa’s problems were KPMG South Africa’s. KPMG US’s regulatory catastrophe belonged to KPMG US. KPMG UK’s Quindell, Ted Baker, Conviviality, Revolution Bars and audit-quality problems belonged where the regulators placed them.
Different files.
Different entities.
One exceptionally busy logo.
And Jiten Was An Employment Lawyer
This is the moment where the corporate biography normally resumes its immaculate shape. Kotecha spent five years at KPMG, acquired experience as an employment lawyer and moved to Cummins in 2018. On paper, KPMG is a formidable credential.
That is precisely why TCAP opened it.
Prestigious employers perform a useful laundering function on professional biographies. Nobody writes “worked inside an institution later severely reprimanded over multiple audits” on LinkedIn. They write KPMG. Four letters perform the rest of the magic because institutional reputation does the heavy lifting automatically.
Jiten’s Jobs has never accepted that transaction. If a professional career is presented through famous institutions, those institutions are fair territory for examination. Pinsent Masons gets its cupboards opened. Olswang gets its cupboards opened. John Lewis gets its cupboards opened.
KPMG needed a fucking warehouse door.
The Five-Year View
Place the dates together and the professional scenery becomes difficult to ignore. Kotecha joined KPMG in 2013. KPMG’s 2013 Quindell audit later produced an admission of misconduct and a multimillion-pound sanction. Its 2013 and 2014 Ted Baker audits later produced another admission of misconduct and a severe reprimand over independence.
During the middle of Kotecha’s stint came the Revolution Bars audits for 2015 and 2016, later sanctioned after failures across multiple areas. The 2016 Carillion audit became part of the separate regulator-misleading proceedings. The 2017 Conviviality audit later attracted a severe reprimand and multimillion-pound sanction after serious failures across significant areas.
Then came 2018. Conviviality entered administration in April. Quindell sanctions landed in June. That same month the FRC publicly described an “unacceptable deterioration” in KPMG audit quality and said half of the KPMG FTSE 350 audits it inspected needed more than limited improvements. Ted Baker sanctions followed in August.
Kotecha’s KPMG chapter ended that year.
What an absolutely magnificent time to have the leaving card passed around.
The Consultancy Paradox
There is a broader reason this matters beyond Kotecha. Firms such as KPMG occupy a privileged position in corporate life because they sell the ability to see problems other organisations cannot adequately see themselves. Management lacks expertise, so consultants arrive. Financial statements require independent assurance, so auditors arrive. Regulation becomes complicated, so specialists arrive.
The entire machine therefore depends on an implicit claim of superior institutional competence. We understand controls. We understand evidence. We understand independence. We understand professional scepticism. We understand risk.
Then regulators start opening the machine.
Quindell: insufficient evidence and insufficient scepticism. Ted Baker: auditor independence lost through prohibited circumstances. Conviviality: serious failures across multiple significant areas. Revolution Bars: audits failing their principal objective. The 2018 inspection cycle: unacceptable deterioration. Regenersis and Carillion AQRs: false and misleading material supplied to the regulator.
At that point the slogan begins eating itself.
The experts in risk have a risk problem.
The experts in assurance have an assurance problem.
The people selling professional scepticism have misplaced the scepticism down the back of the bloody sofa.
Professional Scepticism, My Arse
TCAP’s first KPMG visit found the gender pay gap. The second found Carillion and nineteen years of clean audit opinions before one of Britain’s largest corporate collapses. The finale finds something broader and, in some ways, nastier: a professional-services institution repeatedly encountering regulators over the very qualities sitting at the heart of its commercial authority.
No single case tells the entire story of KPMG. Large firms perform enormous volumes of work, most of which never appears in disciplinary proceedings, and separate international member firms remain separate legal entities. But that does not make the documented pile disappear. It merely tells us how large the building is around it.
Jiten Kotecha spent five years inside that building before moving to Cummins.
Five years of employment law inside a professional-services machine that sold corporations expertise in compliance, governance, risk and workplace matters. Five years beginning with the 2013 Quindell audit later sanctioned for misconduct and ending in 2018 as the FRC publicly declared an unacceptable deterioration in KPMG audit quality.
Then came the later regulatory excavations. Conviviality. Revolution Bars. Regenersis. False papers. Misleading minutes. Severe reprimands. Multimillion-pound sanctions. Root-cause reviews piled on top of root-cause reviews until the bloody roots must have wondered what they had done to deserve all the attention.
That is the KPMG entry on the CV once the blue logo stops doing the talking.
Not guilt by association.
Institutional scenery.
And what magnificent, smoke-belching, regulator-infested scenery it turned out to be.
Professional scepticism?
My arse.
Lee Thompson – Founder, The Cummins Accountability Project
Sources
- The Org – Jiten Kotecha: Senior Counsel, Labour & Employment at Cummins
- Solicitors Regulation Authority – Jiten Kotecha
- KPMG UK – Annual Report 2018 and Transparency Report
- Financial Reporting Council – Sanctions in Relation to the Audit of Quindell plc
- Financial Reporting Council – Sanctions Against KPMG in Relation to the Audits of Ted Baker plc
- Financial Reporting Council – Big Four Audit Quality Review Results Decline
- Financial Reporting Council – Sanctions Against KPMG and Nicola Quayle: Conviviality
- Financial Reporting Council – Sanctions Against KPMG and Michael Neil Frankish: Revolution Bars
- Financial Reporting Council – Sanctions Against KPMG in Connection With Regenersis and Carillion Audit Quality Reviews
- US Securities and Exchange Commission – KPMG Paying $50 Million Penalty for Illicit Use of PCAOB Data and Cheating on Training Exams
- US Department of Justice – Former KPMG Executives and PCAOB Employees Charged Over Confidential Inspection Information
- KPMG South Africa – Baseline Report 2018