24/03/2020 Press article Introduction to Auditing. Ade Alcoi
Phill Thomas: “A few enterprises can do auditing with quality”
He is the man of change. It must guide 200,000 workers through the paradigms of the new digital universe. This is the weight with which Bill Thomas (Vancouver, Canada, 1967) goes to the interview. For just over a year, he has been the global head of the KPMG auditor. A company that enters the year 26.4 billion dollars (23.4 billion euros) and that moves in an uncertain world. The rise of far-right movements, Trump’s bellicose trade policy, and a weakening global economy sketch red lines on the planet’s meridians.
But this is happening around the company, inside, artificial intelligence and massive data analysis should make auditing a more accurate activity. The prologue to good numbers. “The Spanish division grows in double digits,” says Bill Thomas. Words that take root in an increasingly complex Earth.
Question. You meets regularly with some of the most important executives on the planet. What are your biggest concerns?
Reply. I am very fortunate to be able to meet with them. We also produce an annual study that surveys 1,300 CEOs from around the world. There are three recurring concerns, both in the report and in my conversations: geopolitical transformations, changes in trade agreements, and cybersecurity.
Question. In this sense, what worries you the most: the protectionism of Donald Trump or the rise of the extreme right in Italy or Brazil?
Reply. I occupy a global position and I see every day organizations that have the same scope. I firmly believe in free trade and I think that freedom is essential for organizations that need to work on a world stage.
Question. Do you foresee in the medium term a landscape where the European economy is weakening faster than expected and the United States is approaching a recession? Or is it too exaggerated?
Reply. The economy of the Old Continent remains positive. We trust in your strength. In Spain we are even seeing a slightly faster development than in the rest of the region. So much so that here we expect double-digit growth. They are solid results in a strong economy.
Question. Population aging, climate change, overpopulation, populism … How can companies deal with such profound problems that also happen at the same time?
Replay. There are many countries that are facing these challenges differently. There is, for example, Japan and the aging of its citizens. There are brilliant, gifted people who are using innovation and technology to solve some of these challenges. But it is important to note that the way to search for a solution is by separating them into pieces and solving each one in due time.
Question. Your global strategy for KPMG is clear: the company’s digital transformation. What does it suppose? How are you going to do it?
Reply. We are changing the way we provide our services. The strategy is to invest 1,000 million dollars [880 million euros] to improve our methods and incorporate technology there. Data analysis, for example, will bring not only more effective audits, but it will also give us more information, knowledge and, at the same time, allow us to carry out higher quality work.
Question. How does technology affect auditor performance?
Reply. As I mentioned before, technology will help us carry out better quality audits. Artificial intelligence and data analysis will provide the auditor with more information and enable him to spend more time where critical thinking and evaluation are needed. But in no case are they going to replace the role of the professional. There are always situations where human judgment is necessary.
Question. The mergers and acquisitions area is one of the fastest growing. Do you expect a drop in business due to the weaker economy?
Reply. We are fortunate because we have a large M&A business worldwide and especially in Spain. When the economy is active and strong, M&A operations are a fundamental part, but also when it weakens, there is room for restructuring and consolidation. In both cycles we help our clients.
Question. In which strategic areas is the company investing the most?
Reply . In three lines: auditing, lawyers and financial and business advice. I explained that we are investing $ 1 billion in improving the technology we use in audits to make sure they are of the highest quality. We also invest in tax advice and consulting. The destination is, above all, those areas where technology is key.
Question. Regulation has been intensified in all sectors of the economy. Auditing is not an exception. How has it affected you?
Reply. It is true. Regulation has increased worldwide in recent years. And experience has helped improve the quality of audits where there is a healthy relationship between the regulator, the client, and the auditor. We live with regulation and I think it helps improve the result of the work.
Question. The Big Four (PwC, Deloitte, EY and KPMG) control 98% of the London FTSE 350 index. Is that concentration justified? Can it be harmful?
Reply. This is an important topic. If you think on a global scale, on the experience we have around the world in areas where a high level of specialization is needed, be it taxation, valuations, forensics [fraud detection], or all the elements that are necessary to carry out a quality audit, there are few organizations that can do it. Plus we compete fiercely with each other for those global accounts. And in other business areas, such as auditing or advisory services to national companies, our competence goes beyond the Big Four.
Question. The German financial regulator has hired you to monitor the resulting stricter Deutsche Bank regarding its anti-money laundering and terrorist financing policies. Are there gaps in the banks?
Reply. I cannot speak of any specific client, but what I can tell you is that we are absolutely committed to helping in the fight against money laundering and terrorist financing. Question. Let’s talk, then, about women on the great boards of directors. Do you support quotas? That there is a mandatory parity between men and women? Can you break the glass ceiling at KPMG?
Reply. The best organizations are those in which diversity and inclusion are assumed as part of them. At KPMG people bring their own identity to work. The concept of quotas is a complex issue. I believe in meritocracy. People must get their jobs on merit. And if there is a group of the population that is not well represented, we must ensure that we are doing everything possible to create a diverse and inclusive team.
Question. What is KPMG’s way of retaining talent, especially from younger generations, who are rapidly changing jobs?
Reply. This is a vital issue for us. We are one of the largest creators of jobs for millennials worldwide. What these young people want is to know the purposes of the organization in which they work. Having said that, to retain our professionals, we have to tell them about who we are, what we believe in, what our mission is and what is valuable to us. It is going beyond telling them: this is what we do and this is how we do it.
Question. You have been in the company for more than 25 years. How do you build a great corporate culture and how do CEOs change a bad one?
Reply. Actually, it all comes down to a few basic principles, being transparent, open, honest and frank when you face a problem. As for whether a person can change a corporate culture on their own… The truth is that no one, no matter what job you have, does nothing on their own. It is always the work of a team. I am fortunate to work with 10,000 amazing partners worldwide. Together we are responsible for reporting misconduct when we see it.