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NEW KPMG AUDIT PROCESS

KPMG Peat Marwick LLP has unveiled a new and redesigned audit process called "Business Measurement Process" (BMP).

This new approach reflects one firm's way of integrating what has usually been thought of as nonaudit skills into the audit process within an industry specialization framework.

According to KPMG, the new process helps provide insight into market changes and best practices. The idea is to deliver more value by identifying performance improvement opportunities for clients. The BMP involves a five stage process -

Strategic Analysis. During the initial stage, the KPMG team works with the client to identify and understand critical elements of the business and the environment - including competition, technology, economic conditions, legislation, industry issues, the client's objectives and strategies, and the key risks that threaten achievement of the objectives. Business Process Analysis. In this stage, the team studies the client's business processes that most closely relate to achieving the business objectives. Information gathered during this stage is used in preparing the business model profile.

Risk Assessment. The KPMG team, in conjunction with management, identifies processes in place to address and control the risks and considers how they are being addressed and controlled. Information gathered during this stage is used in preparing the business risk profile.

Business Measurement. Driven by the risk assessment of the previous stage, the audit is completed during the business measurement stage. The team focuses on processes and variables that have the greatest impact on financial results. Comparisons of these measurements, along with financial results, benchmark data, or other appropriate measures are obtained to develop a "gap analysis."

Continuous Improvement. The gap analysis allows the team to identify a client's performance improvement opportunities. In this stage, the team focuses on both the financial and nonfinancial measures most likely to generate the improvement the client seeks.

In addition to an opinion on a company's financial statements, the BMP generates the following analyses:

  • Business model profile - to establish a mutual understanding of the client's business and business processes of which it is comprised.

  • Business risk profile - to confirm KPMG's understanding of management's perceptions, assumptions, and judgments about the risks.

  • Gap analysis - to evaluate the importance of performance improvement opportunities.



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