When big public companies change auditors, it often makes headlines. For example, General Electric in June announced Deloitte would take over as its independent auditor in 2021, ending its over 100 year relationship of working with fellow Big Four firm KPMG.

Neither firm was able to comment on the change, and Deloitte declined to comment for this story. But public company auditor changes are not uncommon.

Audit Analytics’ 2019 summary of audit client gains and losses reported in Securities and Exchange Commission filings showed all Big Four firms except Deloitte experienced net SEC client losses in 2019 for the fifth straight year. The last time any of them other than Deloitte was net positive was KPMG in 2014 (plus-15).

In 2019, KPMG had a net loss of 15 engagements, gaining nine SEC audit clients but losing 24. Of these, 12 clients went to other Big Four firms and seven to global and national firms. KPMG ranked second in new assets audited at $93.2 billion and finished fifth in market capitalization audited at $6.7 billion.

Rich Callahan, national audit growth leader at KPMG, shared his perspective on the many challenges and process issues involved in public company auditor changes.

When viewing the Audit Analytics statistics, Callahan believes it is more important to look at individual changes and reasons why companies change auditors, like smaller public companies deciding to go with smaller accounting firms. “I don’t see any trends that are noteworthy,” he said.

As the Audit Analytics report shows, Big Four firms win and lose clients from other Big Four firms each year. “Audit has always been competitive,” Callahan said. “I still remember someone telling me early in my career that the Big Four are just different shades of beige, but in the local market what is important is how our current and future clients think about each partner’s personal brand.”

From a competitive standpoint, Callahan said KPMG focuses on delivering the best client services and experience today because that will drive future growth. “It’s all about doing the right thing in the right way, and that hasn’t changed over the years,” he said.

When asked how the marketplace sees KPMG, Callahan said audit committees are the firms’ customers and judge firms based on their engagement teams. “There is a lot of information out in the marketplace about each of the firms, but we try to focus on what we can control, which is delivering a quality audit,” he said.

KPMG employs the Center for Audit Quality’s external auditor assessment tool for public companies, as many firms do. “Each engagement team starts the audit process by doing a self-evaluation against these key principles,” Callahan said.

For new clients, KPMG’s onboarding process has evolved over Callahan’s 35 years there. It is applied across the board and scaled to the size of the client and engagement.

“We leverage our rapid start platform to help auditors gain an understanding of the client’s business practices and accounting policies, along with its industry information,” Callahan said. KPMG created the platform by incorporating in one place public information, investor presentations, and client messages and videos to employees and shareholders. New associates can quickly get up to speed by using this platform. “They no longer have to sit for hours reading the company’s 10-K,” Callahan said.

KMPG employs a continuous improvement process control group for its audits. “It is a small dedicated group whose role in new engagements is to act as the facilitator between the engagement team and the client,” Callahan said. “They walk through and map the entire audit process start to finish, including key handoffs, contacts, and typical pain points.” Then auditors use the maps to determine where they can introduce automation and data extraction tools to minimize costs for both the auditor and the client.

The firm also engages its tailored data solutions group to work with client IT teams to make sure information is available and to identify areas where data can be extracted better and at a lower cost for all. The goal is to get better information to improve the audit effort in areas of greater risk.

“Our approach to technology is not just digital/robotic audit but integration of people’s professional judgment enabled by technology to provide better client insights,” Callahan said. This year, the firm opened KPMG Lakehouse, a professional development and innovation center, in Orlando. It worked with a number of universities to develop a Master of Accounting with Data and Analytics program, where KPMG-sponsored students can earn a Master’s degree during their internship with KPMG, get hands-on use of D&A technologies, and then can go on to be hired as experienced associates.

In situations where KPMG is no longer the auditor, Callahan said the firm still must meet its professional obligations to the client and its responsibilities to the public. “Nothing really changes because your firm is being replaced,” he said. “Fundamentally you still have a job to do, and an auditor’s professional responsibility to the public transcends what might happen when a customer is going away in a commercial situation.”