Governance

KPMG is the brand under which the member firms of KPMG International Limited (‘KPMG International’) operate and provide professional services. KPMG’s member firms and affiliates operating in the Chinese Mainland, Hong Kong SAR and Macau SAR work together on a collaborative basis, subject to local applicable laws, and together are referred to as ‘KPMG China’, ‘firm’ or ‘we’ throughout this report, unless otherwise specified.

KPMG China is not a legal entity and does not hold share capital or have shareholders. The legal entities operating under KPMG China include KPMG (a Hong Kong SAR partnership), KPMG (a Macau SAR partnership), KPMG Advisory (Hong Kong) Limited, KPMG Huazhen LLP, and KPMG Advisory (China) Limited, each of which is a legally distinct and separate entity and describes itself as such. Each KPMG member firm is responsible for its own obligations and liabilities.

At KPMG China, governance is upheld by two fundamental bodies: the Board and the Executive Committee. The Board, serving as the principal governance and oversight body, comprises elected partners from diverse business sectors, holding the primary responsibility for overseeing and advising on the firm’s strategic direction and related matters. Meanwhile, the Executive Committee, composed of primarily partners leading our four key regions and core business functions in China, acts as the core management body of the firm. Its collective goal is to advance the firm's vision of becoming the most trusted and trustworthy firm in society.

Our Board comprises partners with expertise in ESG-related domains such as climate change, energy and natural resources, in addition to their professional qualifications and industry knowledge in relevant fields. Our Head of ESG, who is also a Board member, plays a pivotal role in bringing crucial ESG-related expertise to our discussions and services. In addition, members of both the Board and the Executive Committee hold significant positions within the firm and actively engage in external roles and activities, such as industry associations, professional bodies, and non-profit organisations.

The OIP department is responsible for driving the implementation of KPMG China’s OIP strategies and initiatives, advancing the fulfilment of the firm’s ESG commitments across the organisation. The department sits under the Corporate Affairs function headed by Tracy Yang and is led by the Head of OIP, Wilson Pang.

The OIP team reports regularly to the Executive Committee, which oversees the strategic direction and development of OIP strategies. The team also works closely with our four OIP pillar leads, relevant department representatives and other key stakeholders to ensure smooth planning and execution.

Each of our four OIP pillar leads collaborates closely with different working groups and departments to drive meaningful change on key focus areas, such as anti-corruption, inclusion, diversity and equity (IDE), decarbonisation and community investment.

In recent years, the OIP team has also worked closely with our client-facing ESG service teams to fortify our internal and external ESG strategies. Together, we have jointly enhanced our firm’s decarbonisation measures and strategies and co-organised related events, solidifying our position in the ESG market. We recognise that these efforts are not just about strategy setting or branding, but about walking the talk to achieve KPMG China’s ESG commitments, and optimising the positive impact we create for our clients and stakeholders.

KPMG China strives to become the most trusted and trustworthy professional services firm. In a world where unprecedented changes are the norm, we seek to inspire confidence and empower change in all we do. We act with a clear purpose, guided by our Values, and adhere to the highest standards of personal and professional behaviour, with a view to maintaining the trust of clients, stakeholders and the public.

Going forward, we will continue to act with integrity in our pursuit of innovation and professional excellence, and we will strive to safeguard capital markets and create exceptional value for our clients and society as a whole.

At KPMG China, we take a rigorous approach to the Enterprise Risk Management (ERM) process, which helps identify the top risks that may impact our firm in achieving its strategic objectives. Our Executive Committee, as the owner of the ERM process, leads and implements the ERM to identify and manage the top risks, while the Board provides oversight and monitors the robustness of the ERM process. This provides the Executive Committee and the Board with the information they need to best determine if, and to what extent, firm resources should be reallocated, and strategy reassessed.

The consistent ERM approach is also adopted for Functional Risk Profiling conducted in Audit, Tax and Advisory, which helps functional leaderships identify the top risks that affect the achievement of their strategic objectives and business plans. This process includes development and implementation of action plans to address the top risks identified at the functional level, as well as identification of any risks that should be aggregated to the firmwide level. In 2023, Sector Focused Risk Profiling was initiated through a consistent ERM approach with the aim to identify sector-specific critical risks.

All of our functions and people at KPMG China are obliged to identify, assess and manage risks, as well as to ensure the quality of our work. To drive consistency and accountability, we have a central team (the ‘Central Team’) composed of dedicated professionals with key responsibility for overseeing and promoting a culture of quality and integrity across the firm. The Central Team is led by the Head of Quality and Risk Management, who reviews and enforces compliance through policies and procedures relevant to professional risk management, ethics and independence, quality control and compliance.

The Central Team also considers the impact of key findings from integrated quality monitoring and compliance programmes, as well as the adequacy of recommended remedial actions. In addition, the Central Team offers continuous guidance into quality monitoring/compliance; regulatory inspection liaison; information protection and data privacy; contracting; ethics and independence; client and engagement acceptance; and general quality and risk management. The Central Team develops policies and guidelines that enable KPMG professionals to assess the risk level of a client or an engagement before accepting business engagements or relationships, as well as supporting our daily operations and enabling the business to manage risks proactively.

High-quality audits represent the cornerstone of society’s trust in KPMG China, and we are fully committed to delivering outstanding audit services. KPMG China unwaveringly supports the spirit of the 20th National Congress of the Communist Party of China (CPC), the National People‘s Congress (NPC) and Chinese People’s Political Consultative Conference (CPPCC) (the ‘Two Sessions’), and the Central Economic Work Conference. The firm has meticulously implemented the requirements in the Opinions of the General Office of the State Council on Further Regulating Financial Audit Order and Promoting the Sound Development of the CPA Industry and the Opinions on Further Strengthening Financial and Accounting Supervision. Under these requirements, KPMG China assists regulators in standardising their oversight of financial statement audits and audit quality, performs its responsibilities as a market ‘gatekeeper’ and continually works to improve audit quality, with the goal of serving the national economy.

To uphold our commitment to high-quality auditing, we constantly review and assess our existing audit processes, audit methodology and quality management system to ensure that our work meets or exceeds the firm’s and the industry’s quality standards. Over the past year, we have continued to take a proactive approach to strengthening the firm’s quality management system and improving its consistency. Our actions include implementation and operation of the System of Quality Management (SoQM) in compliance with International Standard on Quality Management (ISQM) No. 1 and No. 2, Quality Management Standards for Accounting Firms No. 5101 and No. 5102, as well as the relevant requirements provided by the KPMG global network. Based on testing and evaluations conducted on the SoQM as of 30 September 2023, the SoQM has been found to fulfill the requirements set forth by the new quality management standards.

Furthermore, we continue to foster an integrity-based culture driven by talent development and training, expand our investment in digital infrastructure, including information systems and cybersecurity, and enhance our audit methodology and KPMG Clara, the firm’s smart audit platform.

KPMG China’s tax services are guided by the firm’s Values, governed by the Principles for a Responsible Tax Practice and Global Quality Framework, and driven by our Purpose to inspire confidence and empower change. Our tax professionals provide customised, comprehensive and high-quality tax services to a range of corporate and government authorities. When liaising with tax authorities and clients, our staff are required at all times to act with integrity and in compliance with relevant legal, regulatory and professional requirements.

As the first expo focusing on carbon neutrality in China, the Shanghai International Carbon Neutrality Expo garnered strong support from national ministries and the Shanghai Municipal Government in June 2023. During the exhibition, KPMG China held the following four sharing sessions, as well as a series of other events under the theme ‘Key Pathway to Magic Green’:

• Global and Chinese perspectives on low-carbon development
• Low-carbon transition pathways and development
• Technology, digitalisation and innovation
• Climate-related investment, carbon trading, carbon asset management, and carbon financing

A series of industry insight reports were published during the event. Leading experts, academics and company representatives were also invited to discuss the best practices and development trends in the field of 'dual carbon'.

Our commitment to integrity and accountability is not just something we say; it is woven into every decision we make and every action we take. We believe that only by upholding these commitments can we maintain KPMG China’s professional reputation and build trust and closer relationships with our clients and stakeholders. We are committed at all times to acting lawfully, ethically and in the public interest and working against corruption in all its forms.

We have zero tolerance for bribery and corruption in any form by any party. Our Code and comprehensive anti-bribery and corruption requirements are enacted to ensure that the highest standards of integrity are maintained across the firm.

Every year all partners and staff are required to take the ‘We Do What is Right: Integrity at KPMG’ mandatory training course to keep abreast of our firmwide anti-bribery policies and enhance understanding in relation to the importance of complying with regulations, professional standards and laws.

Furthermore, we put forward clear requirements and procedures for our people regarding situations in which inducements (gifts or entertainment) are provided or received.

At KPMG China, we respect human rights, and continuously monitor and evaluate our operational processes to ensure they align with our human rights commitments. As stipulated in the Code, we do not tolerate behaviour that is illegal or unethical or otherwise breaches human rights standards, whether by KPMG people, clients or suppliers, or by public officials with whom we have working relationships.