Business Analysis of KPMG Taseer Hadi & Co

Submitted By

Yamna Fakher

L1S10BSAA0005

Session 2010-2014

Bachelors in Applied Accounting

Project Supervisor

Prof. Abubakar Mirza

Faculty of Commerce

University of Central Punjab

1-Khayaban-e-Jinnah Road, Johar Town, Lahore, Pakistan

pg. 1

Business Analysis of KPMG Taseer Hadi & Co

A PROJECT SUBMITTED TO

THE UNIVERSITY OF CENTRAL PUNJAB

IN FULFILLMENT OF THE REQUIREMENT OF THE

DEGREE OF

BS (HONS) APPLIED ACCOUNTING

By

Yamna Fakher

L1S10BSAA0005

Session 2010-2014

SUPERVISED BY

Prof. Abubakar Mirza

Faculty of Commerce

University of Central Punjab

1-Khayaban-e-Jinnah Road, Johar Town, Lahore, Pakistan

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Certificate of Approval

It is certified that the work contained in this thesis titled Business Analysis of KPMG

Taseer Hadi & Co has been carried out and completed by Miss Yamna Fakher, Registration

No L1S10BSAA0005 under my supervision during her last semester of Bs (Hons) Applied

Accounting at University of Central Punjab, Lahore Pakistan.

Date: __________________ ___________________

Prof. Abubakar Mirza

(Supervisor)

______________ Approved by

Prof. Muhammad Azhar Ikram Ahmad _________________

Dean

Faulty of Commerce

University of Central Punjab

Lahore

pg. 3

UNDERTAKING

I YAMNA FAKHER Roll No L1S10BSAA0005, STUDENT OF BS (HONS) APPLIED

ACCOUNTING hereby declare that the matter printed in the project titled Business Analysis

of KPMG Taseer Hadi & Co is my own work and has not been printed, published and

submitted as research work in any form, in any university, research institute etc. It has been

properly acknowledged to the original author.

Date: _________________

Signature of Student: ________________

Name of Student: Yamna Fakher

Registration Number: L1S10BSAA0005

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DEDICATION

TO

MY

FAMILY AND FRIENDS

pg. 5

Certificate of joining

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pg. 7

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pg. 9

Acknowledgement

University internship program is a great opportunity for an individuals self-

development as well as intellectual and professional learning. It is a matter of great honor for

me to have so many remarkable people to lead me through in finalization of my internship

period. Despite all the efforts I have put into this thesis, putting this together would not have

been possible without the help of many individuals.

All my praises are for the Allah Almighty for showering me with His uncountable

blessings throughout my internship program and during the preparation of my thesis.

I would like to express my thanks to Prof. Muhammad Azhar Ikram, Dean Faculty of

Commerce, University of Central Punjab in particular with whose kindheartedness all this

could have been possible.

I would also like to avail this chance to express my profound gratitude and deep regards

to my guides, Prof Abu Bakar Mirza and Prof. Imran Shehzad for their exemplary guidance,

supervisory and constant appreciation throughout the course of the internship program and

thesis. The blessing of their help and guidance from time to time shall carry me a long way in

the journey of my life on which I am about to embark.

I also take this opportunity to express a deep sense of gratitude to my department heads

of KPMG which includes Mr. Nageen (Senior Manager), Ms Nibras Qureshi (Deputy

Manager), Mr. Masab Akbar(Deputy Managers) and Mr. Emad Maqbool (Supervisor) for their

cordial support and guidance which helped me in completing my tasks through various stages.

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I will also like to specifically mention the names of the HR Department which includes

Miss Sara Syed, Miss Maisa Khan and Sir Taurab Ali for tolerating me whenever I went to

them for any kind of guidance or for obtaining information for my thesis.

I am obliged to my colleges and my friends at KPMG which include Sadaf Khan (ACCA

Trainee) and Anum Tahir (CA Trainee) for the valuable information which they provided me.

I am grateful for their cooperation during the period of my assignment and for their

friendly behavior and openness which made me feel comfortable in an environment which

was very strange for me. I would also like to thank all the other articled students in my

department at KPMG who have helped me write this thesis based on their various insights.

Especially Nouman, Taimour, Umair, Zain and Salim.

Last but not the least I am grateful for the support and constant motivation of my parents and

my sister, without their help I would not have been able to make this possible.

pg. 11

Abstract

Traditionally, getting a university degree has always been a cause for celebration and

for most of the students this achievement is a signal of the onset of adulthood and offers the

promise of a career that would start in mere months or weeks. But in today's competitive world,

job market for graduates who leave universities armed only with a degree may not be so

fortunate.

Today most of the employers look for students who have held internships because they

understand the value for doing an internship. Internships does not only helps students identify

their career path but also builds connections with in their field of career. It helps them to

understand the practical ins and outs of the corporate world. It makes them realize the fact that

how difficult it is to earn in a world full of competition.

I being a student of final semester of Bs (Hons) Applied Accounting of University of

Central Punjab is required to do an internship for four months to meet the criteria of my degree

program. So I decided to do internship in KPMGTH, one of the big four international Audit

firms. Being a part of KPMG is a great opportunity provided to me by my university. Its not

just an opportunity but a source of honor to work in an international firm with a great reputation.

I have written this thesis as I am required to write it as a criteria of my degree program

but also to provide people with full information about what actually is KPMG, its workings, its

organizational structure, business analysis of KPMG and the things I learned during my

internship period. I have also provided some recommendations for the firm and a conclusion

that I have derived after doing this research.

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I have prepared my thesis by keeping in mind a person who has just heard the name of

KPMG and want to know about it. So this thesis will definitely be a source of knowledge and

information for him/her.

pg. 13

Table of Contents

1. Vision statement14

2. Mission statement...15

3. Introduction of the firm......16

4. Hierarchy of the Firm.....64

5. Departments of the Firm........66

6. Roles and responsibilities of departmental Heads.73

7. Accounting and Internal control system of the firm..74

8. Human Resource policies of the Firm91

9. Marketing strategies of the Firm99

10. SWOT Analysis.............................101

11. PEST Analysis.......................105

12. Recommendations..110

13. Activities Report....111

14. Bibliography...121

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Vision Statement

Be the leaders in the markets we chose to serve. We aim to be number one in reputation and

number one or two in size recognized as leaders in terms of services we provide, the

industries we serve and the countries we cover. This means driving ourselves in the best we

do. (HR Manager, 2014)

pg. 15

Mission Statement

Our mission is to enhance the KPMG brand across the region by working together to

grow a cohesive business unit for the benefit of all practices and achieving compliance with

international/EMA policies and quality standards in implementing the KPMG Vision. (HR

Manager, 2014)

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Introduction of the Firm

KPMG

KPMG is the abbreviation of the names of the founder members of the present

organization. The names are as follows: (Wikipedia, 2014)

K stands for Klynveld

P stands for Peat

M stands for Marwick

G stands for Goerdeler

KPMG Global

It is one of the big four international auditing firms. It is a global network of

professional firms and provides services in Audit, Tax, and Advisory. KPMG operates in 150

countries and have more than 137,000 professionals working in member firms around the

world. In key sectors the member firm clients of KPMG include many of the world's leading

organizations, government institutions, national market leaders and other highly respected

organizations. KPMGs tagline is LEADING THROUGH COMPLEXITY (Global, 2014)

KPMG Pakistan

KPMG in Pakistan is represented by KPMG Taseer Hadi & Co. KPMGTH Pakistan

is a member firm of KPMG International (a Swiss cooperative). It was established in 1969,

and in total it has 29 partners and more than 1100 professional staff. KPMGTH has a wide

range of qualified professionals which include Chartered Accountants, Certified Accountants,

pg. 17

Certified Internal Auditors, Certified Information Systems Auditors, Masters in Business

Administration, and Cost Management Accountants. (Pakistan, 2014)

As KPMGTH is a partnership firm so it is owned by the local partners. KPMGTH is

formed under partnership Act and is regulated by the bye laws of Institute of Chartered

Accountants of Pakistan. KPMGTH is responsible for its own obligations and liabilities but it

is not responsible for the obligations and liabilities of other member firms. (Pakistan, 2014)

In major areas of its practice which are audit, tax, risk advisory and financial advisory

services, KPMG Taseer Hadi & Co have substantial individual and collective experience of

serving clients. The value proposition of KPMG Internationals global network is embodied in

KPMG Taseer Hadi & Co in providing professional services to organizations in both the public

and private sectors. It relies on KPMG member firms for advice on potential business risks, the

integrity of their audit opinion, the provision of sound and valuable business guidance.

(Pakistan, 2014)

KPMGTH's approach has a fundamental element of being industry focused which has

enabled KPMGTH to develop in-depth knowledge of their clients' businesses. It provides them

with an informed perspective on the issues they have to face and this strategy runs across the

full range of KPMGTH's core services (Pakistan, 2014)

Governance Structure

All the partners of KPMGTH elect the senior partners and the board. The board and

the senior partner is elected for three years. The responsibility of the board is to overall

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Management of the partnership including budgets, proposals, annual business plans operating

and financial performance etc. The senior partner elected is also the chairman of the board

and this board meets up on regular basis in a year. (Co, 2014)

Values of KPMG Pakistan

The values of KPMG International are the same for all its member firms. These values

govern KPMG Taseer Hadi & Cos relationships with its teams, clients and communities.

Their values form an underlying principle that (Pakistan, 2014)

How they do business with their clients across the world

And how they establish a unified platform on which their brand is deeply rooted.

KPMG Taseer Hadi & Cos clients recognize their unique identity that emerges from

their commitment to their values. These values are given as follows: (Pakistan, 2014)

a. We lead by example At all levels they act in a way that exemplifies what they

expect of each other and their member firms clients.

b. We work together They bring out the best in each other and create strong and

successful working relationships with each other.

c. We respect the individual They respect people for who they are and for their

knowledge, skills and experience as individuals and team members.

d. We seek the facts and provide insight challenging assumptions, pursuing

facts and strengthening their reputation as trusted and objective business

advisers.

pg. 19

e. We are open and honest in our communication sharing information, insight

and advice, frequently and constructively and managing tough situations with

courage.

f. We are committed to our communities They act as responsible corporate

citizens and broadening their skills, experience and perspectives through work

in their communities.

g. Above all, we act with integrity They constantly striving to uphold the

highest professional standards, provide sound advice and rigorously maintain

their independence.

Principal business themes

These are as follows:

Work together to develop an increasingly cohesive business unit

Increase the effectiveness of the regions approach to markets.

Enhance profitability

Align with global HR policies and procedures.

Achieve global standards of infrastructure.

(Lahore, 2014)

Pakistan Value Charter

We will work together as a team and pursue agreed strategies leaving aside personal

bias

We will set achievable targets for our people and would accept achievable targets and

deadlines from clients

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We will be proactive and innovative with our clients and will respond to their needs

quickly, effectively, objectively and would endeavor to exceed their expectations

We will respect our own and our people's need to balance personal and business lives

We will acknowledge and reward people who make positive contributions

We will keep ourselves up to date on professional and business developments and will

proactively share this knowledge

We will create an environment where cynicism, oppression and rudeness are not

acceptable and will not make judgment on people and issues before ascertaining full

facts

We will recognize that leadership is a privilege and a responsibility and the leader's

success will be measured by the success of those on the team being led. (Lahore, 2014)

Awards of KPMG:

Worlds most attractive employer after google-2012

Human Rights Campaigns Corporate equity Index-2011

Diversity Inc Magazine Top 50 Companies-2011

Fortune 100 Best Companies to work for-2011

Companies that care honor roll-2011

Working mother 100 Best Companies top ten-2010

(Lahore, 2014)

KPMG Taseer Hadi & Co Culture

Culture is a system of shared meaning and beliefs of an organization and how they act.

For KPMG Taseer Hadi & Co, its employees are its asset. KPMG Pakistan takes some

pg. 21

measures to motivate its employees. Some of the motivational techniques used to encourage

employees both monetary and nonmonetary at KPMG Taseer Hadi & Co are as follows:

Promotions

Good salary

Good environment

Bonuses

Transport facility

Saturdays off.

Job security

Annual dinners

Leave fare assistance

Paid Holidays

Wishes for special days (birthday, marriage)

Special awards for good performers

KPMG Taseer Hadi & Co recognizes a staff members personal behavior and

interaction with others as a vital part of the duties of his /her position. In order to achieve the

desired level of performance and corporate objectives, preservation of professional working

environment is encouraged. (Student, 2014)

KPMGTHs environment is such where all persons are treated equally and with respect.

Rights of People are respected and efforts of staff are encouraged. The achievements of any of

the employee is given due recognition. (Pakistan, 2014)

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KPMG Taseer Hadi & Co uses leadership managerial style. For them a Leader is a

person who can influence others and have managerial authority. Leadership style varies from

person to person. Every manger according to his position, authority and his personal

capabilities leads his/her subordinates. But a few dominant styles can also be noted at KPMG

Taseer Hadi & Co that are as follows: (Student, 2014)

Self-confident

Intelligent

Extraverts

KPMG Pakistan also has a Service culture. All employees are committed to the

continued development of the excellent service culture in which they seek consistently to

exceed customers expectations. (Student, 2014)

Work culture of KPMGTH is deep seated in their values. It provides an environment

for easy sharing of ideas and encourages equal opportunity for learning and growth. It extends

beyond the workplace, defining their member firm professionals interaction with their

communities, policy makers, shareholders and above all, their clients. (Student, 2014)

The element that sets apart KPMG Taseer Hadi & Co from other professional service

firms is their open and friendly culture. For KPMG Taseer Hadi & Co open and friendly culture

means open-mindedness in exploring and sharing new ideas, and in understanding that people

develop their careers at their own pace and according to their own priorities. (Pakistan, 2014)

pg. 23

It's about being open to the world around them. They don't expect their people's daily

lives to start and finish within the four walls of the KPMG Taseer Hadi & Cos office. They

encourage their people to get out and to get involved. They believe that successful careers come

from balancing their peoples work time with active involvement in a range of social and

community activities. It's about open, honest and friendly communication, both with their

colleagues and clients. (Pakistan, 2014)

KPMGs Global Code of Conduct

The purpose of the Global code of conduct is:

Sets out KPMGs commitments

Encourages us to act as role model

Defines how we perform as individual

Promotes ethical behavior

(international, 2014)

KPMGs Network

Their network is the organizational structure which links KPMG Firms around the

world. Their commitments to their networks are to: (international, 2014)

Accept the right clients and only accept engagements that they can perform consistently

with high quality standards.

Work with clients, suppliers and sub-contractors that live up to KPMGs core ethical

standards.

Drive quality by developing and applying appropriate methodologies and procedures.

Address challenging situations in the right way by applying professional ethics and

consulting with experienced people within KPMG to reach the right decision

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Strive at all times to protect and enhance KPMGs brand and reputation

Keep assets and resources safe and use them only for appropriate business purposes.

KPMGs member Firms clients

KPMGs member firms clients are the organizations and individuals to whom they or

any other KPMG member firms within their network to provide professional services. Their

commitments to their member firm clients are: (international, 2014)

Delivering high quality services to clients in line with their qualifications, experience,

professional commitments and engagement terms.

Act lawfully, ethically and in public interest.

Maintain independence and objectivity and avoid actual or perceived conflict of

interest.

Protect their clients confidentiality and only use their information for proper business

purposes.

Promote member firms services honestly and compete fairly.

Prohibit bribery and corruption by their people and do not tolerate illegal or unethical

behavior by their clients or suppliers or by public officials.

Being in KPMG, an individual is responsible for the following

Stay Informed

Stand Firm

Take ownership

Raise Issues

Consult with others

pg. 25

(international, 2014)

An individuals responsibilities as a leader

Lead by example

Support your team

Develop your team

Uphold exemplary standards

Exercise your judgment

Be accountable

(international, 2014)

KPMGs People:

Their people are employees, partners, subcontractors, consultants and others with

whom they work in the provision of and support of professional services. (international,

2014)

Their commitments to their people are:

Help their people to be objective, ethical and professional.

Encourage their people to raise ethical and professional issues without fear of

retaliation.

Invest in their peoples professional development so that they can reach their full

potential.

Champion an inclusive and collaborative culture that is free from bullying,

discrimination and harassment where everyone is treated with respect and dignity.

Respect the confidentiality of their peoples personal data.

Provide a safe and healthy work environment.

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Maintain a just and fair approach of remuneration.

Dress code

All the staff of KPMGTH are required to be clean and well groomed. Males must

wear formal trousers and shirts with ties. Females must wear appropriate clothing befitting

the professional environment of the firm. Informal attire such as sports shirts and jeans are

not permitted. (Lahore, 2014)

Disciplinary matters

To promote fairness and consistency in the treatment of all staff members, KPMGTH

has a disciplinary procedure designed to ensure that: (Lahore, 2014)

The required standards of conduct are followed properly and these are as follows:

There is a fair method of dealing with any alleged failure in this regard.

Any action of a staff member which is unsatisfactory in that it affects the proper

execution of duties or trust or confidence may be a cause for disciplinary action, for

example:

1. Poor work performance.

2. Unauthorized absence from work.

3. Persistently reporting late for assignments.

4. Being deliberately uncooperative.

5. Violation of work place rules.

The approach of KPMGTH is to counsel the staff. If this is not successful, subsequent

steps are taken like a series of warnings and a disciplinary interview with the concerned Partner.

pg. 27

This may result in a staff member being terminated, registered trainees with ICAP may be

asked to seek alternative firm or their training period may be terminated.

In case of gross misconduct, a staff member may be dismissed without notice by the

Staff Partner if it has been established after investigation and hearing the concerned individual

that an act of gross misconduct has taken place. The acts of gross misconduct include:

Breach of Ethics & independence rules

Breach of clients confidentiality.

Censure/ expulsion by a relevant professional body

Physical violence, disorderly/threatening conduct at work

Dishonesty, theft, or fraud.

Sexual harassment

Being under the influence of alcohol/ illegal drugs at work.

Grievance

The firm has a Grievance Procedure in place to facilitate an early and satisfactory

resolution of any grievance concerning the firm and staff members. In case a staff member has

a grievance regarding his/ her terms and conditions of engagement which can be substantiated,

the issue should be presented personally or in writing to the immediate supervisor. The firm

does not entertain any anonymous communication in these matters. (International, 2014)

If the issue remains unresolved for more than two weeks, the staff member may request

involvement of the manager/concerned partner and finally the staff member is allowed to

submit his grievance on form HRF-003-01 to the Staff Partner. Staff partners decision in

consultation with the Senior Partner will be final. (International, 2014)

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Geographic distribution of KPMG Taseer Hadi & Co in Pakistan

These are the places where KPMG have their offices: (Pakistan, 2014)

Groups and teams in KPMG Pakistan

The different management committees are as follows.

Auditing committee

Head Office Committee

Human Resource Committee

(HR Manager, 2014)

The different specialized businesses are as follows:

Tax

Audit

Financial advisory

ERP

IT Advisory

Support teams are as follows:

Human resource

Finance

Internal audit

Lahore(GMT +5)

Islamabad(GMT +5)

Karachi(GMT +5)

pg. 29

Risk management

Goals and Objectives of KPMG Taseer Hadi & Co

Acting lawfully and ethically, and encouraging this behavior in the Marketplace.

Delivering quality service to clients in line with qualifications.

Professional commitments, and engagement terms.

Maintaining independence and objectivity, and avoiding conflicts of interest or undue

influence.

Preserving client and business confidentiality and privacy.

Promoting member firms services honestly and competing.

KPMG help their clients to grow with confidence.

KPMG create fulfilling career opportunities.

KPMG help to build trust between investors and organizations.

KPMG have an established reputation as outstanding professionals who work together

to deliver value.

KPMGs people live with the goal to attract and keep talented people, develop

relationships with the right clients, and protect and enhance their reputation.

Treating everyone with respect and dignity.

Respecting the privacy of its partners and employees.

Fostering an environment in which partner and employee work/life balance can be

achieved.

Providing a workplace that is free from discrimination, harassment, misuse of

substances (Lahore, 2014)

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Services Provided by KPMG Pakistan

KPMG is one of the leading providers of

Audit,

Risk Advisory,

Tax

Financial advisory services in Pakistan.

KPMGTHs services can help individuals and organizations in achieving their

objectives and becoming successful in the new economy by

Measuring the performance of individuals

Managing risks faced by organizations

Leveraging knowledge

(Pakistan, 2014)

Code of Business Ethics:

Understanding of KPMG standards of ethical conduct is very important. For this

reason KPMG has designed the code of business Ethics. They

Introduce resources available to help,

Clarify their standards

Provides practical advice about complying with them.

(International, 2014)

Respect & Dignity

They treat everyone with respect and dignity, valuing individual and cultural

differences and recognizes their rights.

pg. 31

Privacy

KPMG respects and protects the privacy of personal information of its people.

And access to personal information is limited.

Work Life Balance

KPMG encourages a healthy balance between work and private life. It motivates

partners and employees to work with their performance managers.

Equal Opportunity

KPMG is an equal opportunity employer which is:

committed to ensure that its diverse work place is free from discrimination

Promotes individual based on their performance.

Harassment:

They do not tolerate any form of harassment of its people by anyone, including

partners, employees, client and other third parties

Safe Work environment:

They are committed to provide its people with the safe and secure work

environment and understand that this is fundamental for the firms success. KPMG is

committed to ensuring the health, safety and well-being of its people and visitors

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Markets of KPMG Pakistan

Pharmaceuticals

Banking

Information and entertainment

Power

Automotive

Building and Construction

Capital Markets

Chemicals and performance technologies

Diversified Industrials

Energy and Natural Resource

Food, Drinks & Consumer Goods

Infrastructure, Government & Health care

Investment Management

Life Sciences

Media

Private Equity

Real Estate

Retail

Technology

Telecommunication

Transport & Leisure

Insurance

(Pakistan, KPMG Pakistan Portal, 2014)

pg. 33

Communication within KPMG

Communication within KPMG is done vertically. KPMG maintains a system through

which everyone is connected. However it is horizontal at executive level. And this

communication is in the form of hard core copies of the important documents. (Pakistan,

KPMG Pakistan Portal, 2014)

KPMG recognizes the vast use of technology in business. It also has an intranet. In

todays fast pace hi-tech environment, it is unimaginable to live without information

technology. The availability of the intranet facility in the bank for the employees for internal

communication and coordination, easy access to valuable information and knowledge sharing.

KPMGs intranet facility provides the employees a rapid access to wide range of information.

(Pakistan, KPMG Taseer Hadi & Co, 2014)

Following are some technologies KPMG are using to do its business:

Computers

Intranet

Intercom

Emails

Teleconferencing

ERP

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Dynamic Process of Management at KPMG Pakistan

Decision Making:

Strategic decision making is done at the top level but if any problem or a situation arises

where manager has to make quick decision than he /she can make it. But the ultimate signal is

given by top management. (Student, 2014)

Conflicts and their Resolution:

On a regular basis employees can come across different kinds of conflicts. These

conflicts are solved in a way that does not disturbs the normal work environment.

Circumstances like personal interest or that appear to create conflict of interest of the firm or

its customers are to be avoided. (Student, 2014)

Situations may arise where an employee, his/her spouse or family member has a direct

or indirect hold of a business interest which can conflicts with firms interest. In order to assure

that the firm makes arrangements for employees that one should declare in advance such

interest to the management. (Student, 2014)

Employees should not make a contract on behalf of the firm with an organization

in which they have a direct or indirect interest. Employees on the payroll of KPMG must not

undertake any other employment that may be part time, temporary or other, or act as consultant,

director or partner of another organization. (Student, 2014)

If the person feels that a specific situation would create conflict of interest than one

should consult their reporting officers or the concerned manager for seeking help before taking

any action. (Student, 2014)

pg. 35

Controlling against frauds and illegal actions

Within the boundaries of the firm, staff members should remain alert for any kind of

illegal activity being carried out and any such activity must be reported to the concerned

manager or reporting officer. (International, 2014)

There has been a continuous debate on the need to prevent and detect fraud and

improper behavior. A lot of work has been done on this issue like (International, 2014)

The strengthening of internal controls,

Internal control reporting and

Forensic reviews,

This is in an environment in which expectations appear to be increasing for directors and

auditors to ensure that the systems are in place and processes exist to detect significant fraud,

whether collusive or not.

Better governance

For judgments to be accurate fair and useful the people involved need to make

integrated decisions involving numbers and judgments. Audit committees that are strong and

independent prove to be an effective judge of quality and independence. They are a challenge

to management that give the investors a greater representation inside the companies they own.

(Lahore, 2014)

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Methods used for the Performance Measurement by the Managers

3 point rating scale

Exceptional Performance that exceeds Demonstrates

Strong Performance Standard Performance that reaches

Needs Improvement Standard Performance under

9 point rating scale

Its a simple matrix. Its vertical axis represents what you have achieved and horizontal axis

represents how you have achieved it.

360 degree feedback

Dialogue includes 360 feedback. It is a valuable tool for seniors to develop and formulate

their personal plans. Target group in such a feedback are partners and management. This feedback is

administered at least after 3 years. (International, 2014)

Controlling

Basic controlling authorities at KPMG Pakistan:

The basic controlling authority at KPMG is the executive committee which comprises of:

Partner

Group heads

pg. 37

Group heads are responsible for looking at their respective areas for deviations if any

and also to identify new issues arising. This comprises of internal control authorities. However

there is an external controlling authority which visits from abroad every year. (International,

2014)

Control approaches used by KPMG Pakistan

The control approaches used at KPMG Tasser Hadi & Co are different at different

levels. They are as follows:

Proactive control approaches at executive level

Aggressive- contingency based control approaches at lower level

ICAP is the regulator of all audit firms in Pakistan. KPMG has to comply with certain

instruction given by ICAP from time to time. (Lahore, 2014)

Confidentiality

Confidential information is any information that comes to an individual's attention as a

result of the individual's association with KPMG, unless such information is publicly available.

Clients expect KPMG firms and their personnel to exercise alertness and vigilance and to

follow standards of conduct in order to maintain the confidentiality of such information. To

this end, KPMG has developed methodologies and procedures to prevent any real or perceived

breach of client confidentiality. This heading sets out KPMG's policies on confidentiality, as

well as guidance on client confidentiality agreements and ethical dividers. (international, 2014)

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Responsibility

KPMG personnel must exercise due care in determining whether information is

confidential, and is responsible for maintaining confidentiality. (international, 2014)

Disclosure of Confidential Information

Except for consultations with appropriate KPMG persons, external legal counsel, or

those authorized by the client, or where there is a professional or legal duty to disclose,

KPMG personnel do not discuss confidential information with other KPMG personnel or

external contacts. (international, 2014)

Confidentiality Requirements

KPMG personnel, both during their association with the organization and afterward,

do not disclose any KPMG client information except where, after consultation with the RMP

and/or legal counsel, it is determined that:

There is express written authorization from the client

There is a professional duty to disclose the information

Disclosure is required by legal or judicial process

Disclosure is required by the law itself.

Unless prevented or obviated by law, or other sensitivities exist, the authorization,

preferably written, of the client is obtained before any disclosure is made. (international,

2014)

KPMG personnel do not discuss any client's affairs in public places, including

elevators, airplanes and other public transportation, and restaurants, or with members of their

pg. 39

families unless there are clear business reasons for doing so. If such discussion is required, a

heightened sense of awareness of public access is exercised. (international, 2014)

Except for consultations with other KPMG personnel involved in the engagement,

KPMG personnel do not discuss confidential information with other KPMG personnel. In the

case of consultations on difficult professional issues or potential service opportunities, any

potential sensitivities or conflicts of interest need to be considered. The person being consulted

is informed as to which information is confidential. (international, 2014)

Ethical Dividers

Engagement partners are responsible for deciding whether any additional procedures,

such as establishing ethical dividers, are required where there is a higher degree of concern in

the circumstances of an engagement or for clients (or former clients) that may have a higher

level of concern regarding the confidentiality of their affairs. (international, 2014)

An ethical divider is a series of measures implemented to protect confidential client

information. The objectives of the ethical divider are to:

Restrict the confidential information of a client to the KPMG personnel advising the

client Enable the KPMG firm to demonstrate that reasonable steps were taken in this regard.

If ethical dividers are established, procedures include: (international, 2014)

Separation of client service teams

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Prohibition of exchange of client information between members of the teams on all

matters relating to the client engagements

Prohibition of access to working paper files by anyone other than members of the

specific engagement team or for purposes of consultation with other professional

advisers or specialist KPMG personnel.

Client Confidentiality Agreements

A client confidentiality agreement (or nondisclosure agreement) is a signed agreement

between a KPMG firm and a client that sets out the specific terms under which KPMG will

retain the client's confidential information or vice versa. The agreement is usually designed to

impose a higher level of confidentiality than would be required under general law, regulations,

or professional standards. (international, 2014)

Client or third-party proposed confidentiality agreements are to be avoided whenever

possible, as KPMG firms are already bound by professional and KPMG codes of conduct. Only

a partner may execute client confidentiality or nondisclosure agreements. A confidentiality

agreement clearly specifies the engagement to which it relates. (International, 2014)

Prior to executing a confidentiality agreement, care is taken that:

The confidentiality agreement does not restrict KPMG from fulfilling its professional

responsibilities

The information subject to the confidentiality restriction is defined as specifically and

as narrowly as possible

The agreement covers only information obtained by KPMG following the date of its

execution

pg. 41

Information that has been independently obtained or developed by KPMG without

using the information disclosed under the agreement is excluded from the scope of the

agreement

The confidentiality agreement does not restrict KPMG from performing its normal

review processes, such as second-partner review or an assessment review program

Any confidentiality obligation ceases when the information becomes public knowledge

or when the information has been disclosed to KPMG by a third party without a

restriction on disclosure.

The following clause is recommended for inclusion in any confidentiality agreement

KPMG executes the obligations of confidentiality under this agreement shall not apply

to information that:

Is lawfully in the public domain at the time it is transmitted

Has been independently developed by KPMG without violation of this agreement

Is independently known to KPMG at the time of receipt through no unlawful act of

KPMG

Is disclosed by KPMG with the prior written approval of [the entity]

Becomes known to KPMG from a source other than [the entity], which source is not

subject to any restriction on disclosure is required to be disclosed by law.

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The obligations of confidentiality under this agreement shall not be construed as preventing

KPMG from: (International, 2014)

Conducting its engagements for [the entity] in accordance with firm policies and

professional standards

Conducting its normal review and quality assessment process with regard to

engagements for [the entity]

Complying with the requirements of any relevant law or regulation. Examples of

confidentiality agreement are set out in Risk Management Manual.

Statement of Compliance

KPMG personnel will complete, initially upon joining the organization and then

annually thereafter, a statement of compliance to confirm their understanding of and

compliance with the organization's policy on confidential information. It is the responsibility

of the RMP to establish a process for obtaining these statements. (Student, 2014)

Reporting Breaches

If KPMG personnel believe at any time they may have inadvertently breached client

confidentiality, the engagement partner is advised of the potential breach immediately. The

engagement/lead partner will determine, in consultation with the RMP, what steps, if any, are

to be taken. (international, 2014)

Ethics and Independence

KPMG personnel provide to play a major part in building KPMGS reputations and

also in delivering objectives and independent advice/opinions. It is important for the regulatory

pg. 43

environment in which many of the KPMG member firms operate and that they behave with

integrity and objectivity in all respective assignments. It is the responsibility of all KPMG

member firms and KPMG personnel to exercise alertness and vigilance in applying KPMG

ethics and independence policies. (international, 2014)

Responsibility

It is the responsibility of KPMG personnel to maintain their integrity and objectivity.

Compliance with Independence Regulations

KPMG personnel make themselves familiar with, and comply with, professional

ethics and independence regulations applicable to the work they perform. This chapter

contains KPMG International's minimum policies. KPMG firms may themselves be subject

to more stringent local regulations, or they may have clients subject to a more stringent

foreign jurisdiction [for example, the requirements of the U.S. Securities and Exchange

Commission (SEC)]. Advice as to the application and interpretation of ethics and

independence rules and regulations of a foreign regime is sought from the relevant KPMG

firm's RMP or other partner, such as the filing reviewer. (international, 2014)

Monitoring Compliance with Ethics and Independence Standards

KPMG firms establishes adequate systems to assist KPMG personnel in applying

applicable ethics and independence standards and to monitor compliance with those standards.

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In order to ensure that the Firms policies on independence are understood and adhered

to, the partners, directors and professional staff members shall on joining the Firm and

thereafter annually on 01 July, submit Form 1 to the Risk Manager or his nominee.

(International, 2014)

The partners, directors and professional staff shall on joining the Firm and thereafter

annually on 01 July, submit Form 2 return of securities ownership to the Risk Manager or his

nominee.

The partners, directors and professional staff shall within 7 days of becoming the

owners of prohibited securities inadvertently or under bequest shall submit Form 3 to the Risk

Manager or his designee. The disposal of such securities shall be notified within 7 days in the

Form 4 to the Risk manager or his nominee. (International, 2014)

The partners, directors and professional staff shall on joining the Firm and thereafter

annually on 01 July, submit Form 5 return of employment of family members and close

relatives with the Firms clients to the Risk Manager or his nominee.

The partners, directors and professional staff shall on joining the Firm and thereafter

annually on 01 July, submit Form 6 return of borrowing and leasing facilities to the Risk

Manager or his nominee. The HR department will maintain complete record of the above

returns and ensure completeness. (International, 2014)

The Risk Manager or his nominee may request additional information and documents

with regards to returns filed to ensure their accuracy; such documents may include copy of tax

pg. 45

returns, and other filings, etc. The Risk Manager or his nominee may carry out review of the

records of HR department to ensure that these are properly maintained and facilitate assessing

the individuals independence. The Senior Partner and partner and manager in charge of the

engagement shall ensure that client allocations and postings do not violate the Firms

independence.

In case of failure of any partner, director and professional staff member to file the

required returns within the stipulated time frame, disciplinary action may be initiated after

giving due opportunity of being heard. (International, 2014)

Where the independence is not violated, but the default in filing is deemed intentional,

the individual concerned may be reprimanded in first instance and any subsequent violation

may lead to penal action including termination. Where the independence is violated and default

in filing the return is deemed intentional, the individual concerned may be terminated, without

any further notice.

The Risk Manager in consultation with the Senior Partner instead of termination may

penalize the defaulter in any other manner deemed appropriate. (International, 2014)

Integrity and Objectivity

At the outset of any consideration of the question of independence, it cannot be too

strongly emphasized that, while codes or guidelines may be enunciated, by far the most

important standard by which to judge independence is the individual's professional integrity.

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Whatever statements are promulgated by KPMG, no KPMG person is to lose sight of his or

her basic responsibility, namely to exercise the highest standard of professional judgment.

Although objectivity is essentially a matter of individual perception, adherence to

certain standards of conduct helps ensure that the objectivity of KPMG will be maintained. The

following is a broad summary of such standards: (international, 2014)

KPMG firms follow KPMG independence policies on all engagements. Any departure

from these standards by a KPMG firm requires the approval of KPMG International's executive

committee.

Each KPMG firm must ensure that it remains objective in rendering any of its services,

particularly when it is seen to be closely identified with particular specialist services or

products.

KPMG firms do not enter into any kind of referral fee or contingent fee relationship

whereby remuneration is not based on the traditional measure of professional services rendered,

except where permitted by applicable laws and customs. Consideration is given to the possible

loss of objectivity arising from conflicts of interest. (international, 2014)

Where a KPMG firm benefits from any commission arrangement in supplying a product

or service to a client, the client is informed of this fact in writing.

pg. 47

Independence, Confidentiality, and Insider Trading

"Confidentiality", particular care is taken to maintain independence where an individual

finds him- or herself, because of his or her professional relationship with a client, having

knowledge of price sensitive information in relation to the securities of a client or former client

or third party that is not generally available to the public. The possession of this knowledge

calls for the highest level of integrity, particularly in regard to the buying and selling of

securities. Anyone having such knowledge must ensure that his or her actions can at no time

be construed as having been influenced by such knowledge. (international, 2014)

Compliance with KPMG Policies

Prospective partners and staff members are informed of the KPMG firm's policies on

ethics and independence. Upon acceptance of employment, partners and staff are required to

sign a confirmation that they are in compliance at that time. Thereafter, partners, directors and

professional staff members are required to sign an annual confirmation. Such confirmations are

to be obtained by each KPMG firm, which then affirms its independence to KPMG

International's headquarters. (Lahore, 2014)

Compliance-Responsibility for Determining Independence

All KPMG partners and professional staff are responsible for determining their

compliance with the policies in this handbook, as well as any additional policies applicable

internationally. Where work is undertaken in a foreign jurisdiction, the KPMG staff seeks

advice from the local RMP as to whether any additional independence requirements may apply

(e.g., the independence requirements of the U.S. SEC). (international, 2014)

48 | P a g e

All KPMG personnel ensure that they do not hold securities prohibited. Sources to

verify that an entity is not a KPMG audit client include prospectuses, annual reports, proxy

statements, and the international list of "Publicly Held Audit Clients" (PHAC list) that is

maintained by KPMG International's headquarters and is available on intranet pk.kpmg.org

and K-World.

All KPMG partners and professional staff are required to confirm their independence

annually at beginning of the financial year i.e. 1 July each year. (international, 2014)

Family Members and Close Relatives

The independence of any KPMG member firm, its partners, and professional staff

members will not normally be damaged as a result of the employment of a family member or

close relative in an audit client.

Independence would be considered to be damaged if a family member of one of the

following has a position with the client that has significant influence over the client's operating,

financial, or accounting policies. (international, 2014)

A manager or staff member taking part in the engagement is a partner or director who:

Is located in an office that participates in a significant portion of the engagement

Has the ability to exercise influence over the engagement

Has any involvement with the engagement (for example, consultation on auditing or

accounting issues).

pg. 49

If a partner's or professional staff member's close relative is employed by a client in a

position of significant influence, the partner or professional staff member shall not participate

in the engagement. In addition, the partner is not located in an office that participates in a

significant portion of the engagement. (International, 2014)

Directorships

Partners, directors and professional staff members are prohibited from accepting

directorship positions in entities except not-for-profit and charitable organizations or those

established for personal family reasons. Appointments made in the normal course of

conducting insolvency and fiduciary services engagements.

Those established for personal family reasons in very rare cases, directorships where

there is a significant KPMG business purpose (In all such cases, the appointment is subject to

the prior approval in writing by the KPMG firm's senior partner and by the chairman of

KPMG). In no case is a directorship held in an audit client, in a publicly held company, or in

any other client for whom independence is required. (International, 2014)

Risks Associated with Serving as Officer or Director

KPMG personnel should be aware that personal risks could accrue when serving as an

officer or director of an organization or entity. KPMG's professional indemnity insurance

program does not provide any liability protection to KPMG partners or personnel when serving

as an officer, director, or similar capacity other than: (International, 2014)

Advice given or services performed as a director and/or officer, or any similar title of a

corporate entity of KPMG

50 | P a g e

Directorships arising out of the professional business of the Corporate Recovery

practice of KPMG

Directorships arising out of the provision of fiduciary services.

The program also does not provide coverage for partners or employees who participate, in their

own name, in not-for-profit activity where no fee accrues to KPMG.

Some, but not all, KPMG member firms have arranged D&O liability insurance to cover

employees' participation as a director or officer for boards of nonprofit entities. Questions

regarding such coverage should be referred to the firm's national office.

Employment with Clients

Partners, directors and professional staff members may receive offers from clients of

employment in a senior capacity. It is the responsibility of such individuals to notify the firm

if they intend to give serious consideration to accepting such an offer. Similarly, professional

staff members are required to notify the engagement partner of any such offer, which they

intend to give consideration. As soon as such notification is given, the partner, director or

professional staff member ceases to have any involvement in the audit of, or other services for,

that client and the work performed by them till that time shall be reviewed by another partner

or manager respectively to ensure objectivity of the engagement. (Deputy Manager FAS, 2014)

pg. 51

It sometimes happens that a former employee of a client will join the staff or partnership

of a KPMG firm. Such a former employee generally does not participate in the client's audit

until he or she has been with the KPMG firm for at least two years.

According to code of Corporate Governance, advised by SECP, all listed companies in

Pakistan shall not appoint a person as the CEO, the CFO, an internal auditor or a director who

was a partner or director of the firm or a professional staff of the firm (for professional staff

involved on the audit of that company) at any time during the two years preceding such

appointment. The term partner, director or professional staff includes their close relatives i.e.

spouse, parents, dependents and non-dependent children of such partner, director or

professional employee. (Deputy Manager FAS, 2014)

In terms of the Companies Ordinance, 1984, no director, officer or employee of any

audit client, who has been so associated with the client for preceding three years, shall be

eligible to join the Firm as a partner or director. No employee of an audit client who has been

employed by the Firm be admitted to the partnership or promoted as a director unless a period

of three years has elapsed from the date of joining the Firm. Where such an employee is

admitted as a partner or promoted as a director within less than three years period, the firm

shall immediately tender resignation as auditors of the client. (Deputy Manager FAS, 2014)

Gifts and Hospitality

Substantial gifts to or from clients of KPMG firms are prohibited. Small gifts of a token

nature are, however, acceptable. Discounts are not accepted from a client if they are greater

52 | P a g e

than those offered to the client's own staff or, in any event, for material amounts. (international,

2014)

Entertainment or involvement with a client or a client's staff on a social or personal

level to an extent that would adversely impact the objectivity or independence of the individual

or the KPMG firm is to be avoided. (international, 2014)

Non-audit Services-General

KPMG firms are aware of the effect on their independence with respect to audit clients

and potential audit clients of performing services other than audit services. According to code

of Corporate Governance, advised by the SECP, the firm shall not render any services to listed

company audit clients other than attestation, certifications, special purpose audits/reviews and

agreed upon procedures as defined in the ISAs. (international, 2014)

Non-audit Services-Bookkeeping

KPMG firms do not become involved in the regular maintenance of accounting records

of a publicly held audit client. Where bookkeeping services are rendered to an audit client,

partners and staff other than those responsible for the audit perform such services.

(international, 2014)

Particular care is taken so that the client accepts full responsibility for all records

prepared through the bookkeeping services. Similarly services such as designing of accounting

systems or compilation of accounts cannot be provided to listed companies being audited by

the firm. (international, 2014)

pg. 53

Non-audit Services-Investment Advice

The firm shall not engage in investment advisory services. It is clarified that transaction

services engagement to solicit buyer or identifying prospective joint venture partners shall not

be deemed to be investment advisory services. No partner, director or professional staff

member may give advice regarding investments in audit clients. (international, 2014)

Non-audit services-share registrar services

The share registrar services cannot be provided to listed companies being audited by

the firm after 30 June 2003 (international, 2014)

Non-audit Services-Consultancy and Financial Advice

Partners, directors and professional staff members do not assume management

responsibilities or make management decisions for clients. Where a client relies on a KPMG

firm for advice on aspects of financial statements (e.g., setting up of tax provisions), it is

important to ensure that the client is fully informed of the basis and reasons for the advice

given. The client must accept final responsibility for any decisions and any consequential

entries in the accounting records. (international, 2014)

In the rare cases where a staff member is loaned to assist a client, it is made clear to

the client in writing that the staff member is acting during the period of the loan under the

sole direction and control of the client, who must accept full responsibility. (international,

2014)

54 | P a g e

Non-audit Services-Check Signing

The practice of signing checks as authorized signatories on behalf of clients is avoided.

Where in rare cases such responsibility is accepted, it shall be with the prior permission of the

Risk Management Partner and steps are taken to ensure that full indemnification is obtained

from the client. (international, 2014)

Non-audit Services-Custody of Client's Moneys

KPMG firms do not normally hold moneys on behalf of clients. If the firm does hold

a client's moneys for some reason, such moneys are kept separate from those of the firm and

not placed in any position of jeopardy. The maximization of interest on the moneys so held is

regarded as of secondary importance to their safekeeping. If moneys held are to be used to

settle fees due to the firm, a bill must be issued and authorized by the client before

transferring the moneys to the firm's account. Where interest is received on a client's moneys,

whether deposited with the firm or with other bodies, the client is informed of this fact in

writing. (international, 2014)

Professional Fees-Referred Work

Where a KPMG firm refers work to another KPMG firm, the receiving firm advises

the referring firm if the receiving firm would derive a substantial proportion of its fee income

from such referral. If the referring KPMG firm receives such advice, it takes appropriate steps

to ensure that an independent approach is taken to the referred work. (International, 2014)

pg. 55

Professional Conduct

Each KPMG firm has a vital interest in the welfare and reputation of all the other KPMG

firms, individually and collectively. While recognizing that individual KPMG firms must tailor

their practices to the circumstances of their respective territories, it is nevertheless desirable as

general principles that: No KPMG firm deviate from the policies of KPMG, thereby

jeopardizing the professional integrity of the KPMG firm concerned and the image of KPMG

as a whole. Each KPMG firm recognize the need to consider the impact of its activities on the

independence and conflict-of-interest positions of other KPMG firms. (International, 2014)

Reputation

KPMG firms take care in entering into joint professional arrangements to ensure that

they have adequately satisfied themselves as to the professional standing and qualification of

the other party, and take all possible steps to ensure that the terms of reference are such that

the KPMG firm does not accept professional or financial risks beyond the scope of its own

responsibilities and capabilities. While any decisions regarding the acceptability of certain

clients or involvement in joint ventures and cooperative engagements are a matter of business

judgment, consideration is given to the fact that certain assignments could not only be

potentially damaging to KPMG's reputation but also entail an undue risk.

Recognizing the existing cultural and professional climate in the geographic area

involved, KPMG firms do not undertake activities or services or represent clients if such

services would not be considered professionally compatible with public accounting and,

therefore, would reduce the standing of KPMG in the eyes of clients and the general public.

(International, 2014)

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Legal and Ethical

The licensing requirements and the applicable codes of ethics of the accounting and

other professions in various countries must be considered before accepting engagements if such

engagements may impact on, or fall within, jurisdictions outside the KPMG firm's country of

origin. Advice is obtained on the application of codes from the RMP or other appropriate

partner in the jurisdiction where the work is to be performed. (International, 2014)

Visits to Clients of Other KPMG Firms

Where a business visit is being made to the client of another KPMG firm, the nature

and timing of the visit is normally communicated to the KPMG firm as a matter of courtesy,

except in rare instances when the client has a valid reason for expressly requesting otherwise.

(Supervisor FAS, 2014)

Working in the Office of another KPMG Firm

Partners and professional staff members working in the office of another KPMG firm

are subject to the particular rules of that KPMG firm insofar as the clients of that KPMG firm

are concerned and seek the advice of the local RMP on any additional independence

requirements in that jurisdiction. (Supervisor FAS, 2014)

Fiduciary Services

"Fiduciary services" are those services provided by a KPMG firm where the

responsibilities carried out are similar to those of a trustee. The client places confidence in the

pg. 57

KPMG firm to act for the client's benefit. Fiduciary services do not include the KPMG firm

acting as a liquidator, receiver, or trustee in bankruptcy, or in a similar position. (international,

2014)

Fiduciary services that may normally be offered by a KPMG firm include some or all

of the following.

Trust business-acting as trustee or trust administrator including:

Administering or managing property or other trust assets

Providing accounting and management services

Providing personal or corporate trustees, executors, or nominees

Company administration business, including providing:

Property or business management or administration

Accounting and management services, or officers, directors, secretaries, nominee

shareholders, or registered or administrative officer;

Check signatories on client accounts either in the name of the firm or in general.

The foregoing definition is applicable to KPMG firms operating in either Anglo-Saxon

Common Law or Roman Civil Law jurisdictions on the basis that independence and ethics

considerations apply equally to both.

Where a KPMG firm acts as a trustee, the relevant trust fund may invest in prohibited

securities only if the trust assets are managed by professional investment managers on a

discretionary basis for the benefit of the trust beneficiaries. Discretionary investment managers

58 | P a g e

may not invest more than 10 percent of the funds under management in any one prohibited

security, and the trustees take no part in detailed investment decisions but are responsible for

the appointment, dismissal, and general overseeing of the investment advisers.

In the course of providing fiduciary services, partners and professional staff members

may act as directors when the directorship is ancillary and complementary to the other fiduciary

services provided to the client. (international, 2014)

In no case are directorships held by partners and professional staff members in an audit

client, in a publicly held company, or in any other client for whom independence is required.

Where a KPMG firm accepts managerial responsibilities for a fiduciary services client,

KPMG may not act as auditor of that client.

Conflicts of Interest

KPMG personnel conduct themselves with integrity and objectivity and skepticism,

being free of conflicts of interest and bringing to professional relationships an unbiased state

of mind. Achieving this objectivity and skepticism requires alertness and vigilance in the

identification of actual and potential conflicts of interest and the observance of methodologies

and procedures for resolving all conflicts. (International, 2014)

pg. 59

Responsibility

It is the responsibility of all KPMG firms and personnel to be continually alert to

potential conflicts of interest.

Addressing Potential Conflicts of Interest

Potential conflict-of-interest situations are discussed and resolved with the engagement

partner or the Risk Management Partner, and the discussions and resolutions are documented.

Engagements are declined when a conflict of interest cannot be resolved or managed.

(international, 2014)

Protecting the Confidential Information of Former Clients

Confidentiality is dealt with more generally in "Confidentiality". Former clients can

present a different challenge that may be similar to a conflict-of-interest situation. In a situation

where the work the KPMG firm is being engaged to undertake is for a current client, but it

relates to a matter that may affect a former client, the engagement partner considers the risk to

the KPMG firm when deciding whether or not to accept such an engagement and the need, if

any, for additional safeguards to protect the confidential information of the former client.

The first consideration is whether the KPMG firm is in possession of confidential

information of the former client that may be relevant to the current client in respect to the matter

at hand. Where this is the case, the engagement partner evaluates, in consultation with the RMP,

the risk to the KPMG firm (both litigation risk and harm to reputation) of the former client

objecting to the KPMG firm providing services to the current client, and, if such a risk exists,

the measures needed to safeguard the confidentiality of the former client. (international, 2014)

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Where the current and former client are in a potentially adversarial position, conflict

management measures will include, other than in exceptional cases, the KPMG firm seeking

the consent of the current client to notify the former client of the fact that KPMG is providing

services in the matter and the proposal of the use of an ethical divider as described in section

4.2, "Confidentiality". If this is inappropriate because of the confidentiality of the new

engagement (e.g., the new engagement is a forensic investigation), or if consent of the current

client is not forthcoming, the KPMG firm will accept the engagement only where there are

preexisting dividers in place. The dividers are to enable the KPMG firm to demonstrate that

there is no risk that the confidential information concerning the former client was at any stage

passed to the engagement team for the current client. (international, 2014)

The current client is informed of the additional measures to be taken to protect its own

and the former client's confidentiality when its consent is sought for KPMG to approach the

former client. The current client is also asked to agree not to commence any action or

proceeding against KPMG alleging that KPMG was in a professional conflict of interest by

having provided services to the former client.

Seeking consent to notify the former client will serve to help determine whether the

former client objects to KPMG providing services in this engagement. If so, the current client

will be made aware of the potential problem before significant time and resources are invested

in the engagement. Both the current client and the KPMG firm will then be able to make an

informed decision as to whether to proceed with the engagement.

pg. 61

The RMP is consulted in all such situations. The RMP decides on whether, and how, to

proceed with the engagement for the existing client, including deciding on whether to obtain

legal advice. (international, 2014)

Use of KPMG Property

The KPMG name and service marks, KPMG premises, KPMG personnel, and other

KPMG assets are used by a KPMG firm or KPMG personnel only for firm business. KPMG

firms and personnel do not permit clients or no clients to use the KPMG name or mailing

address, except where this forms part of an engagement, and then only if proper client and

engagement acceptance procedures are carried out. KPMG personnel do not use the KPMG

name and service marks in the pursuit of personal activities. (International, Internal Control

Mannual, 2014)

Government or Community Service

KPMG personnel are encouraged to be active in responsible public or community

service groups, including participation in local government activities. Such participation is

beneficial to the community as a whole, helps to develop the individual by broadening his or

her knowledge and acquaintances, and enhances the image of both the individual and the

KPMG firm. Also, because of the reputation of KPMG firms and the qualifications of KPMG

personnel, local community and government groups frequently seek them out. However, many

factors affecting the individual, the KPMG firm, and clients of the KPMG firm are to be

considered before such a commitment is made. (international, 2014)

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Factors to consider in assessing the risk associated with government or community

service roles include:

Whether, despite every effort to conduct such activities on a personal basis, KPMG

personnel may be viewed as acting on behalf of the firm

The risk of potential conflicts-of-interest and other risks when clients or potential

clients are in disagreement with the political positions advocated

The risk that conflicts of interest and adversarial relationships may exist between

political candidates, the KPMG firm, clients, non clients, etc.

The requirement for a commitment of time that may go beyond an incidental

involvement (An excessive commitment of time to an outside activity can be detrimental to an

individual's professional development and the best interests of the KPMG firm.)

In view of the many factors associated with participation in government or community

service roles, KPMG personnel are requested to receive approval from the RMP, or through a

process approved by the RMP, before accepting any such roles.

It is also recommended that personnel who accept positions as directors on boards of

not-for profit entities determine whether they are adequately covered with director's insurance

by the board. Approval of the RMP is required before using any KPMG firm's premises for

personal or community service purposes. (international, 2014)

pg. 63

Professional and Personal Activities

KPMG personnel are prohibited from engaging (themselves, their KPMG firm, or other

KPMG personnel) in personal business activities that result in the perception that they are

holding themselves out as a KPMG firm.

KPMG firms and personnel are prohibited from agreeing to the use of KPMG firm

offices as post restante (postal address) facilities for clients or no clients, except in rare cases

where it is part of other KPMG services being provided to the client and engagement

acceptance procedures have been conducted. KPMG personnel are prohibited from providing

professional services to KPMG's clients and no clients for their own account or from otherwise

providing or offering to provide services in competition with any KPMG firm.

KPMG personnel are prohibited from using the KPMG name, services marks, premises,

or other personnel in any personal or commercial activity external to KPMG business.

(international, 2014)

Use of Firm Name or Service Marks

KPMG personnel are prohibited from using KPMG firm letterhead, facsimile

coversheets, or other correspondence containing the KPMG firm's name or service marks for

personal use. In the case of e-mail and Internet facilities, incidental personal use may be

permitted so long as it does not consume excessive resources, it does not interfere with

individual productivity, and it does not preempt any business activity. Automatic attachments,

such as auto signatures to e-mails that contain the KPMG name or service marks are deleted

from personal e-mail. If there is doubt as to what constitutes personal use of KPMG firm

letterhead or logo, the RMP is consulted. (international, 2014)

64 | P a g e

Hierarchy of the Firm

(Senior Manager FAS, 2014)

KPMG International (Swiss)

AmericaEurope, Middle East and

Asia

Middle East and South Asia

KPMG Taseer Hadi & Co

Board: 8 Members

amoungst which 2 are Senior Partners: Hussain Bassari and Masood Ali

Naqvi

KPMG Islamabad

Partner: Mian Safiullah

KPMG Lahore

Partner: Farrid Ud Din Ahmed

Audit Department

Partners: Fareed ud Din, Bilal Ali and Kamran

Iqbal Yousafi

Risk Advisory Services

Partner: Kamran Iqbal Yousafi and Kamran

Iqbal Butt

Tax

Partner: Zeeshan Ijaz

Financial Advisory Services

Partner: Azam Sheikh

KPMG Karachi

(Principle Office)

Partner: Masoood Ali Naqvi

Asia Pacific

pg. 65

Hierarchy of Authority

(Lahore, 2014)

Partner

Director

Senior Manager

Deputy Manager

Assistant Manager

Supervisory Senior

Senior

Semi Senior

Junior

Probation

66 | P a g e

Departments of the Firm

In Pakistan KPMGTH is one of the top most service providers of

Audit

Tax

Advisory services

Audit

The proprietary software tools and knowledge-based applications of the audit

department brings the power of knowledge to an audit of an enterprise. Professionals of

KPMGTH have extensive information on industry trends and the business issues. (Pakistan,

KPMG Pakistan Portal, 2014)

KPMG Taseer Hadi & Cos audit staff is divided into engagement teams with

professionals who possess suitable knowledge, skills, time and experience to perform the

engagement. Quality audit is dependent on the strong understanding of the team of the

accounting policies, internal controls, business processes and financial reporting issues

particular to the industry and the organization. KPMG Taseer Hadi & Cos engagement teams

consists of subject matter professionals and industry experienced professionals who actively

take part in areas that require special knowledge, skills, or tools. (Pakistan, KPMG Pakistan

Portal, 2014)

The first priority of audit department of KPMG is to provide quality audits as mentioned

above for fulfilling this promise, KPMG professionals remain alert during their audit to comply

pg. 67

with the changing professional standards and regulations (Pakistan, KPMG Taseer Hadi & Co,

2014)

In Pakistan, KPMGTH has always been an early adopter of most of the rules developed

to restore confidence in financial reporting. KPMGTH uses four-phase KPMG Audit

Methodology (KAM) which is their effective audit methodology. It facilitates and enhances

quality of audit. KPMGTHs goal is to deliver quality, independent, rigorous audits.

KAM guides the professionals of KPMG in delivering rigorous audits of the financial

statements of an organization. The audit methodology is created to meet applicable national

and international standards. It focuses on the (Pakistan, KPMG Pakistan Portal, 2014)

1. Critical nature of substantive procedures

2. Effective risk assessment

3. Control testing activities.

KPMGTH gives opinions according to the national statutory requirements and in

compliance with all relevant national and international regulations.

Tax

Tax is a very important head for companies and an effective tax advice can provide a

competitive advantage. This would result in reduction in the risk of regulatory challenges and

sustainability. KPMG has an international tax network that works with regional and global

teams to give advice efficiently and effectively. (Pakistan, KPMG Pakistan Portal, 2014)

68 | P a g e

KPMG has a number of tax services which are corporate and individual planning and

compliance, as well as global projects that involve designing and implementing tax strategies.

This helps in producing sustainable long-term tax savings. They also provide advice in areas

like international corporate tax, mergers and acquisitions, transfer pricing, indirect taxes, trade

and customs and international expatriate services. (Pakistan, KPMG Pakistan Portal, 2014)

According to KPMG tax strategies often serve as a change catalyst for a client's

business affecting strategy, structure, people, culture, technology etc. For this purpose

understanding the client's appetite for change and risk is very important in implementing a tax

plan that can help in improving shareholder value. (Pakistan, KPMG Pakistan Portal, 2014)

The International Corporate Tax professionals have a wide experience of working

cross-border with deep knowledge of their home jurisdiction to provide their global clients

with viable tax strategies.

The Global Transfer Pricing practice consists of a team of

Economists

Tax practitioners

Lawyers

Financial analysts operating around the world.

This is a multi-disciplinary approach that is supported locally by KPMGs network of

tax professionals who offer member firm clients effective transfer pricing strategies throughout

the world.

pg. 69

KPMGTH has an international network of skilled tax professionals who have a lot of

experience in international corporate restructuring at a large scale. This practice is known as

The Global Mergers & Acquisitions (M&A) tax practice. This approach coordinates advice

on a broad range of deal-related tax issues, from corporate and indirect taxes to shareholder

(Pakistan, KPMG Taseer Hadi & Co, 2014).

This network of professionals can render member firm clients with strategies at national

or global or regional level. This helps in reducing their exposure to a number of indirect taxes,

as well as advising on cost control by using improved administrative efficiency and

compliance. There are many types of businesses that are exposed to indirect taxes, such as sales

tax and excise duty. (Pakistan, KPMG Taseer Hadi & Co, 2014)

The network of Trade and Customs professionals advises clients on possible reductions

of both administrative and tax costs, particularly in relation to the import or export of goods.

The network of International Expatriate Services (IES) professionals gives a broad variety of

compliance, advisory and administrative services to international organizations transferring

their employees between different countries.

Advisory Services

Risk Advisory Services

KPMG Taseer Hadi & Cos has a Risk Advisory Services department that helps clients

to manage their risk so that they can emphasize on their core businesses. The business of the

client is understood in detail and then the risks are identified. This helps the clients to

improve performance and make decisions that makes their business stronger. (Pakistan,

KPMG Taseer Hadi & Co, 2014)

70 | P a g e

Risk Advisory services consist of services like:

Internal Audit Services

Information Risk Management

Regulatory and compliance services

Program Management & Quality Assurance (PMQA)

Financial Risk Management

Business Performance Services

Financial Advisory Services

Whenever businesses have to do a huge investment in starting a new project or in any other

kind of investment, they always need impartial and independent advice about whether the

investment will be good for the business or not. KPMG has a specific department that is

called as the financial advisory services department in which the above mentioned work is

performed. This advice can extend to turnaround strategies for under performing companies,

support throughout a transaction life cycle and a response to security related matters.

Financial Advisory Services are divided into two further categories: (Pakistan, KPMG Taseer

Hadi & Co, 2014)

1. Corporate Finance (Feasibilities)

(a) Feasibility Study of Industrial gases Project.

(b) Feasibility Study of Paper Board Mills.

(c) Financial Projections for a company operating in health care services.

2. Transaction services (Due Diligence)

(a) Financial due diligence of a company undertaking hydropower projects.

(b) Financial Due Diligence for a merger of two companies.

(c) Cell Assistance to a telecommunication Company.

pg. 71

Hierarchy of Financial Advisory Department

Partner: Azam Sheikh

Senior Manager: Nageen Rehman

Deputy Manager: Nibras Masoom

Deputy Manager: Masab Akbar

Supervisor: Emad Maqbool

Senior Associate: Faiza Faraz

Yousafi

72 | P a g e

Roles and responsibilities of Departmental Heads

Partner

Ensures the business thrives and prospers by:

Leading and initiating the development of products and services Taking a strategic

business advisory role

Und