• Thu
  • Dec 25, 2014
  • Updated: 6:24pm

KPMG gains clients in wake of Enron collapse

PUBLISHED : Wednesday, 27 February, 2002, 12:00am
UPDATED : Wednesday, 27 February, 2002, 12:00am
 

Accounting firm KPMG has gained more clients following the collapse of United States energy giant Enron, according to its global practice leader of management assurance services, Jack Rose.


He said this was due to increasing awareness of potential conflicts of interest when auditors also provide consulting services to listed companies.


KPMG split its auditing and consulting arms two years ago.


Analysts have questioned whether the judgment of Enron auditor Arthur Andersen, which also acted as financial adviser to Enron, was affected by the income it earned from providing consulting services.


The US accounting industry body has now barred accountants that act as external auditors from providing consultancy or internal audit services to the same company.


Mr Rose said this had had a big impact in the US as many companies used the same accounting firm for their internal and external auditing, and the Hong Kong Society of Accountants was considering adopting the same rule.


Internal auditors help to set up a company's corporate governance framework and financial systems, while external auditors review its financial statements.


Mr Rose said that since the requirement was brought in last month, KPMG had seen an increase in demand for its internal auditing services.


It had lost some clients to other firms for the same reason but these had been offset by the new arrivals, he said, adding the Enron case revealed the importance of better disclosure and corporate governance. 'Senior executives have to make full disclosure of their financial situation to investors,' he said.


KPMG will issue a framework for corporate governance to its clients. The initiative is aimed at helping develop common global standards, which now differ widely across markets.


KPMG, as a global accounting firm, would help to collect more corporate governance standards information.


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