Federal senators have accused senior leaders in Australia’s accounting and auditing industry of behaving disgracefully as more revelations emerge about KPMG’s whistleblower scandal.
At a parliamentary hearing in Canberra on Friday the former head of audit at KPMG Australia, Julian McPherson, apologised to a whistleblower after the committee heard the unnamed individual had allegedly been pressured to leave the firm.
The committee also heard that the whistleblower’s computer had been covertly searched because senior KPMG executives were worried that they would leak confidential information about the firm’s business.
When senior executives from Chartered Accountants Australia New Zealand (CA ANZ) appeared before the committee, senators asked them to explain what was going on in the industry.
Senators pointed to the PwC tax scandal in 2023, when it was revealed that senior partners at the accounting firm PricewaterhouseCoopers (PwC) Australia had misused confidential government tax information.
Now KPMG Australia is embroiled in a series of allegations about the misuse of confidential client information, which have led to a series of high-profile resignations and demotions at the firm in recent months, and senators want to know how Australia’s accounting industry is being regulated.
The senators demanded to know why there had been so many scandals in the sector over the last few years. (ABC News: Stuart Carnegie)
Irreparable breach of trust
Starting on Friday morning, the inquiry heard evidence from a roll call of former and senior KPMG Australia executives, Lendlease executives, and senior leaders from Chartered Accountants Australia and New Zealand (CA ANZ).
Revelations emerged about KPMG Australia’s alleged misuse of confidential information belonging to its client Lendlease, its alleged treatment of a KPMG whistleblower, and more details about a third confidentiality breach at KPMG involving another client, Optus.
Lendlease chair John Gillam told senators that his company had decided to part ways with KPMG over the breach of trust. The construction giant has used KPMG to audit its books for 68 years.
Lendlease chair John Gillham (left) and chief executive Tony Lombardo. (Australian Parliament)
When senior executives from CA ANZ appeared, they were asked to explain why the by-laws that govern the behaviour of its members (including KPMG) had failed to stop these major scandals occurring in recent years.
“These are your members!” Liberal senator Paul Scarr said to them.
“Every accountant that’s doing the right thing, who’s a member of CA ANZ, I feel for them.
“There should be a revolution in the streets. This has failed.
“[It is a] systemic failure in terms of regulating this important profession.”
Paul Scarr issued some scathing remarks during the hearing. (ABC News: Stuart Carnegie)
Senator Scarr said the fact that these scandals involved the most senior members of the profession was extremely concerning.
“We had those awful revelations in relation to PWC,” he said to Ainslie van Onselen, CA ANZ’s chief executive officer.
“And now I’m sitting here looking at KPMG and we’ve got the chief executive officer gone, chief operating officer demoted, lead audit partner for Lend Lease removed from that audit, sanctioned, and the lead audit partner of Westpac sanctioned. Leaders of the profession.
“If you have senior members of the profession who are your members, senior members, bringing on the next generation, and these egregious breaches are occurring, and they’re only disclosed because Senator [Deborah] O’Neill and this committee, years after the event, took evidence from a whistleblower and used parliamentary privilege to put them in the public light, I’m putting it to you, Ms van Onselen, that CA ANZ has failed.”
Andrew Yates faced a grilling during the hearing into the audit scandal. (ABC News: Stuart Carnegie)
I’m not a ‘bad apple’: Former CEO
KPMG Australia’s former chief executive officer Andrew Yates then appeared alongside Julian McPherson, KPMG’s former national managing partner of audit and assurance.
Mr Yates said he had reflected on the way that KPMG’s anonymous whistleblower had been treated and on the allegations that KPMG had allegedly misused Lendlease’s confidential client information.
He said he wished that some things had been done differently.
“I’ve reflected extensively,” Mr Yates said.
“In my mind, across that passage of time, I felt at every point of time my team were conducting ourselves in the right way … in the appropriate manner.”
He said he had wanted to promote a “speak up” culture at KPMG Australia.
“In this case we didn’t get it right,” We didn’t make them [the whistleblower] feel comfortable, as I’ve reflected on the things that led to me resigning,” Mr Yates said.
He left KPMG Australia last month, admitting “a lot of those things haven’t worked as I thought they would … we didn’t get it right”.
Senator Scarr said the whistleblower had suffered “horrendous personal, career cost” and continued to do so.
Mr Yates said he was “deeply distressed to hear that that has been the impact on the individual”.
He told the committee that KPMG Australia was a large, complex organisation, but it wasn’t full of “bad apples”.
“You asked me if I’m a bad apple,” he said.
“I don’t believe across my career of 36 years I was a bad apple. Nor do I feel that KPMG is full of bad apples.
“I’m incredibly proud of the 9,000 people that work at KMPG and it’s been a big thing for me to resign and move on from on organisation that I joined in 1989.”
