Partners at KPMG have seen their pay rise by 23% after the firm announced a 27% jump in profits for the last financial year, pushing it up to second place in the rankings of the Big Four.

KPMG's profits for the financial year ending 30 September 2013 rose from £358m to £455m, while overall revenues increased marginally by 0.4% from £1,806m to £1,814m.

Of the firm's three major service lines, audit saw the largest increase in contribution, up by 16% from £154m to £178m. Advisory services were up by 15%, £268m to £308m, while tax revenues were down slightly from £141m to £140m for 2013.

Simon Collins, UK Chairman of KPMG, whose own pay was £2.42m, said: 'We have completed the first and toughest year of our three-year transformation plan; getting a sustainable grip on the bottom line.'

Average pay for KPMG's 583 partners went up from £580,000 to £713,000, and the employee bonus pool increased by 20% from £61m to £73m.

Collins said: 'Improved profitability means that not only have we been able to increase our employee bonus pool but we have also reserved part of this year's profit for investment in improving the quality and increasing the breadth of our services, with plans to invest £450m in the UK over the next three years.'

During the year, the firm reduced its overall headcount from just over 11,000 to 10,800 while partner numbers also came down from more than 600 to 583. Marianne Fallon, the firm's director of corporate affairs said the firm had focused on improving its efficiency in areas such as its back office to help reduce costs.

'Inevitably, one of the biggest costs is our employee base. During FY13 we looked at our staff model across the business and there were some parts that didn't have the right mix and we did make some redundancies, but we have recruited heavily into other parts of the business.'

'But one of the most important reasons behind the profit increase is the efficiency of the cost base. We have really focused in on how we manage our resources and the mobility and flexibility of our employee base much more effectively than we ever have before.

'With a business of our size, the back office costs are quite significant, and we have looked at all of our costs, and how we can effectively procure together across the business. In absolute terms, there hasn't been a significant reduction in headcount. Rather, we have looked at where that headcount is and what they are doing.'

'The revenue challenge reflects the ongoing challenges in the market - for instance the level of transactions remains suppressed. It also reflects the ongoing challenge around pricing. Price is not the number one aspect of large audit tenders, but all businesses are constantly looking at their cost base, so price is an issue.'

However, Fallon said the firm remained confident about future growth, but added the firm was looking for a sustainable increase in revenue. 'It is very easy to grow the top line, but the work needs to be sustainable,' she said, adding although there were signs of recovery, the firm wouldn't 'gear up on the aspiration of growth'.

KPMG cited strong performance across SME and large corporate clients, and in technology-related issues such as cyber security and infrastructure. New audit appointments included RSA, Elexon, the University of Oxford and the Oxford University press.

Collins said: 'We are firmly on the front foot for the year ahead, with early Unilever and Berkeley Group audit wins setting the tone. We have ambitious plans to build on 2013's successes in cyber security and infrastructure, amongst others, and drive growth with additional strategic investments.'