KPMG Australia faces regulatory probes

KPMG Australia is facing overlapping scrutiny from regulators, lawmakers and clients after a whistleblower alleged audit partners misused confidential client information and the firm mishandled complaints about it. The fallout has already forced out former chief executive Andrew Yates, chair Martin Sheppard and other senior figures, while the Australian Securities and Investments Commission, or ASIC, is investigating parts of the matter. KPMG has acknowledged failings in its treatment of the whistleblower and has begun a governance overhaul. The case has widened into a test of how one of the Big Four audit firms handled confidentiality, internal reporting and board oversight. ### Which allegations put KPMG Australia in this position? ABC News reported that KPMG became the subject of a parliamentary inquiry after allegations that audit partners misused client data and that the firm later mishandled a whistleblower complaint about that conduct. The inquiry has examined claims involving confidential information from clients including Lendlease and Optus, according to ABC’s reporting. (abc.net.au) KPMG told ABC and parliament that it had confirmed one whistleblower allegation that confidential client documents relating to the Lendlease audit were retained in a locker at its Sydney office by former chief operating officer Eileen Hoggett. ABC also reported allegations that Optus information was shared with a team pursuing the Telstra audit. ### What has KPMG itself admitted? (abc.net.au) On May 29, KPMG Australia said its “treatment of a whistleblower and investigation into their allegations fell short of the firm’s expectations, those of the whistleblower and the broader community,” according to the firm’s statement and ABC’s report on it. The firm said an initial internal investigation did not substantiate the claims, and an external law firm also supported that outcome before the board commissioned another review by Allens after further complaints. (abc.net.au) KPMG has not publicly conceded every allegation aired in parliament or in media reports. But it has acknowledged failures in how it handled the whistleblower process and has published an action plan focused on governance, culture, ethics and controls. ### Who has left the firm? Andrew Yates resigned as chief executive effective immediately on May 29, saying he took accountability after the whistleblower matter was mishandled, ABC reported. (kpmg.com) Auditing partner Julian McPherson also stepped down at that time, and KPMG appointed Stan Stavros as interim chief executive while it searches for a permanent leader. On June 23, Martin Sheppard said he would leave the firm and retire from his regional board roles. ABC reported that former chief operating officer Eileen Hoggett and audit partner Paul Rogers were also departing, and that Hoggett and Rogers were being investigated by ASIC over the audit scandal. ### What are ASIC and parliament examining now? ASIC chair Joe Longo described the affair in June as an “egregious breach of trust,” according to ABC’s live coverage of the parliamentary inquiry. (abc.net.au) By early September, ABC reported that ASIC was due to face lawmakers again over how it responded to whistleblowers reporting alleged misconduct at KPMG and other accounting firms. (abc.net.au) ABC reported on September 3 that one whistleblower said ASIC had to be “dragged kicking and screaming” to investigate disclosures tied to KPMG. The same report said a separate whistleblower had written to ASIC in December 2021 about claims KPMG may have breached corporations law and later accused the regulator of rejecting that disclosure. ### What changes has KPMG promised? (abc.net.au) KPMG’s September 4 action-plan update said Mike Ebeid was appointed independent national chairman for a three-year term starting August 12. The firm said it was also using external search firms to recruit independent board members, with appointments expected to be finalized by December. The same update said KPMG was reviewing board and executive committee roles, benchmarking governance against ASX corporate-governance principles, and strengthening its consequences framework, whistleblower training and confidentiality controls. (abc.net.au) ### What happens next? Friday’s parliamentary hearing was set to focus in part on ASIC’s handling of whistleblower complaints tied to KPMG, according to ABC’s September 3 report. (assets.kpmg.com) KPMG, for its part, has said the next visible milestones in its response include completing independent board appointments by December and continuing the governance changes set out in its action-plan updates. (abc.net.au)