Accounting Theory’s & Standards

Topic:
Peat Marwick McClintock

Submitted To
Steve Oscar D.Rozario
Assistant Professor
Discipline of Accounting
Premier University,Chattogram

Submitted By

Shajedul Karim
ID: 2003120803819
Program: MBA (1 Year)
Batch: 31st
Section: B
 Peat Marwick McClintock

Introduction
Peat, Marwick, Casselton Elliott & Co was an accounting firm in West Africa that is now part of
KPMG. It was the first expatriate accounting firm established in British West Africa.

The history of the firm dates back to the 1920s when Edward Casselton Elliot and as assistant
opened a branch of Casselton Elliot in Jos to service the accounts of foreign tin mining
firms.When Lagos emerged as a commercial center, a business center was added in the city.This
was soon followed by a new business center in Accra.The firm also opened offices in The
Gambia and Freetown, Sierra Leone. As pioneer chartered accountants, the firm managed the
audits of most expatriate firms in the country including the major banks, Barclays DCO and
Bank of British West Africa, while it also set the foundation and style of accounting practices in
Nigeria. In the 1940s and 1950s, the firm was also the training site for accountancy students who
were on government scholarships.

In Ghana the firm's activities also initially centered around European companies. In 1937, a
change in law allowed private firms to audit government finances. Casselton Elliott soon took
control of auditing government agencies and departments in Ghana.

In the 1960s, Peat Marwick and Casselton Elliott merged. In the 1970s, African professional
began to assume senior positions within the firm and gradually the expatriate owners began to
hand over control to Africans. Some of the local branches changed the business name, in Ghana
it became Peat, Marwick, Okoh & Co and in Nigeria, the firm became Peat, Marwick, Ani &
Ogunde. The later was then managed by Anthony Ani and Otunba Ogunde.

Mission
KPMG’s mission is to be the global network of professional services firms whose aim is to turn
understanding of information, industries, and business trends into value.

Business Segments
KPMG is a professional services firm. The company operates three reportable business units:
Audit – Offerings include Board Leadership Center, Audit Innovation, Private Markets Group,
and Permissible Services.

Tax – Offerings include Accounting Methods & Credits, Compensation & Benefits, Compliance
Management, Economic & Statistical Consulting, Global Mobility, Indirect Taxes, International
Tax, Mergers & Acquisitions Tax, Passthrough Tax, State & Local Tax, Tax Dispute Resolution,
Tax Transformation, Trade & Customs, Transfer Pricing, U.S. Inbound Investments, and
Valuations.

Advisory – Offerings include Management Consulting, Risk Consulting, Deal Advisory, and
Strategy.

History

In 1897 Scottish immigrants James Marwick and Roger Mitchell founded accounting firm
Marwick, Mitchell & Company in New York City. In 1911 it merged with British accounting
firm William Barclay Peat, forming Peat, Marwick, Mitchell & Company. The move allowed
MM&C to expand its operations in Europe, while enabling its partner access to the fast-growing
North American market.

Over the next 75 years Peat Marwick grew to become one of the “Big Eight“ public accounting
firms in the U.S. Its success was aided by the rise of complex tax laws and new industry
regulations. Its high activity made it the subject of lawsuits from some clients claiming if often
failed to expose financial malfeasance. The company responded by becoming the first to request
a public peer review.

In 1978 the firm founded Peat Marwick International to supervise its local branches outside the
U.S., preparing for increased globalization. The following year it generated record revenues.
However, in the 1980s, facing stiffer compeititon, it began automating the audit process –
initially by creating a program called SeaCas, short for Systems Evaluation Approach-
Computerized Audit Support

In 1986, Peat Marwick agreed to merge with Dutch accounting firm Klynveld Main Goerdeler
(KMG). At the time, Peat Marwik was the second largest accounting firm in the U.S., while
KMG was #9. Their combination established the largest such firm in the world in terms of sales,
with revenues of $2.7 billion. Its name was KPMG Peat Marwick McLintock, later shortened in
1991 to KPMG.
Key Dates:

1897:

James Marwick and Roger Mitchell found Mar-wick, Mitchell & Company in New York City.

1925:

Company creates alliance with British accounting firm W.B. Peat & Co. and forms Peat,
Marwick, Mitchell & Company.

1978:

Company changes name to Peat Marwick International.

1987:

Peat Marwick International merges with Klynveld, Main, Goerdeler to form Klynveld Peat
Marwick Goerdeler, based in the Netherlands; the U.S. arm is named Peat, Marwick, Main &
Company.

1989:

U.S. branch is renamed KPMG Peat Marwick.

1999:

KPMG Peat Marwick shortens its name to KPMG LLP, a branch of KPMG International.

Business Model of KPMG

Customer Segments

KPMG has a mass market business model, with no significant differentiation between customers.
The company targets its offerings at firms of all industries and sizes desiring audit, tax, and
advisory services.

Value Proposition

KPMG offers three primary value propositions: accessibility, performance, and brand/status.
The company creates accessibility by offering a wide variety of options. It has actively pursued
acquisitions in order to expand into new areas. Acquired companies include Link Analytics, a
provider of scalable business analytics applications, and Cynergy, a provider of mobility services
and digital experiences. These moves have enabled it to add new capabilities to its portfolio.

The company has demonstrated strong performance through results for clients. High-profile
examples of this include the following:

 Helped a global industrial manufacturing conglomerate develop a logistics target

operating model to help save it $100 million in three years
 Created benchmarking and scenario models for a recently acquired HVAC manufacturer
that identified opportunities for it to save 11% in operational costs
 Transformed the retail sales process for a top wireless provider, which in turn increased
sales reps‘ engagement and output
 Overhauled and updated Cigna’s financial and IT instructure, facilitating easier financial
reporting at a lower cost
 Developed and implemented a human capital management system for Baylor Scott &
White Health that had reduced manual activity and cost of ownership

The company has established a powerful brand as a result of its performance. It is one of the
“Big Four” audit firms, along with Ernst & Young, Deloitte, and PwC. It generated $24.4 billion
in revenues in 2015, up 8.1% from the prior year. It has over 174,000 employees operating in
700 offices in 155 countries. It serves over 80% of the Fortune Global 500 and over 75% of the
Forbes Global 1000. Lastly, it has won many honors, including ranking as #2 in the “World's
Best Outsourcing Advisors“ list by IOAP (2011), induction in the Working Mother Hall of Fame
(2011), International Tax Review Asia Tax Awards (2010) and ranking as #2 in Consultancy
Rankings by OpRisk & Compliance (2009).

Channels

KPMG’s main channel are the direct customer relationships of their partners. The company also
promotes its offerings through its social media pages; webcasts; sponsorships of athletes such as
Phil Mickelson, Stacy Lewis, Magdalena Forsberg, and Alexandre Bilodeau; and attendance of
conferences.
Customer Relationships

KPMG’s customer relationship is primarily of a dedicated personal assistance nature. The

company has its teams work closely with clients to solve their problems. It also offers “KPMG
Learning”, a program consisting of training and executive education classroom courses covering
various industry topics. Most of the courses qualify participants for continuing professional
education credits. KPMG also provides phone and e-mail support as well as an International
Hotline for more serious concerns.

Despite this orientation, there is a self-service component. The company’s website offers online
versions of its classes as well as web-based self studies. It also includes a section called “KPMG
Institutes” that features self-help resources such as articles, reports, podcasts, and webcasts on
emerging industry trends, risks, and opportunities. Furthermore, it includes a glossary and a
feature called “TaxNewsFlash” that offers summaries of recent tax developments.

Key Activities

KPMG’s business model entails designing and providing problem-solving services for clients.

Key Partners

KPMG maintains the following partnership programs:

Strategic Alliances – The company works with top service and technology providers to develop
solutions that benefit its clients in areas such as data and analytics, regulatory change, disruptive
technology, cyber security, and transformation. Specific partners include Microsoft, IBM, SAP,
Oracle, Dun & Bradstreet, Flexera Software, Appian, Coupa, MetricStream, Nuix, and Thomson
Reuters.

KPMG Capital – The company invests in other firms in order to foster innovation and
commercialize new software solutions leveraging its strengths. Specific partners include
Bottlenose, Astrus, Customer Compass, Financial Microscope, and Label Insight.

Key Resources

KPMG’s main resources are its employees, who include accounting professionals, consultants,
and training specialists. The company also maintains important physical resources called Global
Innovation Hubs. One type of hub is its collection of “Insights Centers” that enable customers to
interact directly with their data and watch solutions come to life.

These are located in London, Frankfurt, Paris, and Hong Kong, with additional locations planned
for Sydney, Melbourne, and New York. Another type of hub is its set of “Insights Labs”,
research and development facilities where data scientists investigate D&A applications, incubate
ideas, and develop proofs of concept while creating technology for use across regions and
functions. They are located in the U.S., UK, and India.

Cost Structure

KPMG has a value-driven structure, aiming to provide a premium proposition through

significant personal service. Its biggest cost driver is likely cost of services, a variable expense.
Other major drivers are in the areas of customer support and operations and sales/marketing,
both fixed costs.

Revenue Streams

KPMG has one revenue stream, the fees charged to its clients for its range of services. These fees
vary by type of client and individual project.