Accounting firm KPMG is engulfed in a scandal that has seen several senior leaders quit their roles and the corporate watchdog launch a formal investigation into the firm’s business dealings.
It all centres on an internal whistleblower’s allegations that some of the firm’s senior partners misused confidential client documents.
The audit scandal has led to a “who’s who” of current and former senior leaders from KPMG being hauled before a parliamentary hearing, due this Friday, June 19.
Here’s what has happened so far and what we can expect on Friday.
What’s the scandal all about?
A KPMG whistleblower raised concerns with the firm’s senior leadership team in 2024 that confidential board papers from construction giant Lendlease were used to pitch for and win audit contracts from other firms, including Westpac and Dexus.
An internal investigation did not substantiate the claims, with a further external investigation by legal firm Ashurst supporting the initial outcome.
However, after the whistleblower raised further complaints with the board, a different external law firm, Allens, was appointed to complete another investigation into the claims, which is ongoing.
It has already uncovered secondary instances of inappropriate document sharing.
Deborah O’Neill believes the claims are in the public interest. (Four Corners)
In March, with the protection of parliamentary privilege, Labor senator Deborah O’Neill aired the claims.
“I thought this would be in the public interest,” she told ABC News.
In May, KPMG chief executive Andrew Yates and audit partner Julian McPherson quit their roles over the handling of the whistleblower’s allegations.
KPMG chief executive Andrew Yates quit his role in May. (ABC News: Ian Cutmore)
KPMG released a statement apologising to the whistleblower, saying the initial investigations “fell short of the firm’s expectations”.
Chief operating officer Eileen Hoggett was also demoted from her role.
Why should we care?
The “big four” firms advise business and government and it costs taxpayers big bucks.
“Ernst & Young, Deloitte, KPMG and PWC have earned about $21 billion in taxpayer-funded contracts over the past 10 years,” said Andy Schmulow, a law professor at the University of Wollongong.
The federal government alone currently has 297 active contracts with KPMG, worth $653 million, according to Parliamentary Library research released by the Greens.
And a similar scandal has happened before.
Fellow accounting giant PWC was found to be misusing confidential government information to help multinationals avoid tax.
The arm dealing with public contracts was sold off for a dollar in 2023, and PWC currently does not bid for any federal government contracts due to a non-compete clause.
Who’s investigating?
The corporate watchdog, ASIC, last week confirmed it had launched a formal investigation into three registered auditors who handled the whistleblower’s complaint at KPMG.
Eileen Hoggett was demoted from her role as chief operating officer, but remains with KPMG. (Source: kpmg.com)
It named former chief operating officer Eileen Hoggett and audit partner Paul Rogers as two of the individuals it is investigating, while it is also looking into other individuals.
ASIC Chair Sarah Court told a Senate estimates hearing last week that its focus would be to determine whether the conduct sanctioned by KPMG may be a breach of the duties of a registered company auditor in accordance with the Corporations Act.
However, AISC admitted there are limits to its jurisdictional reach in relation to partnerships such as KPMG.
Who’s appearing at the public hearing?
More than 30 witnesses, including KPMG senior leadership, clients, regulators and industry bodies, will be heading to Canberra on Friday.
KPMG staff include chair Martin Sheppard, interim CEO Stan Stavros, former CEO Andrew Yates, former COO Eileen Hoggett and other former and current partners, two current independent board members, former independent board member (and former NSW premier) Mike Baird, and international leaders.
There is also a mystery KPMG witness, who is unnamed, who oversaw the internal KPMG investigation.
Lendlease CEO Tony Lombardo and chair John Gilliam will also appear. The construction giant is the only client to publicly confirm KPMG misused its documents.
Also appearing are partners from the law firms Ashurst and Allens, as well as the regulator, ASIC.
What will they be grilled on?
Greens senator Barbara Pocock wants to confirm if any more KPMG clients had their information inappropriately shared.
“This inquiry is about getting to the bottom of what happened, to understand exactly what the unethical behaviour was and who was involved, as it appears there were a lot of players involved in the KPMG scandals,” she told ABC News.
“The only client to publicly confirm that KPMG misused its documents so far is Lendlease. So this inquiry is also about getting to the bottom of who else has fallen victim to KPMG’s unethical conduct. Given how many contracts they have with the government and others, there could be many more victims.”
Senator O’Neill told the ABC she wants to uncover the truth.
“I think the thing we want to get on the record is the failure points of the prevailing system. So at the moment there’s a lot of focus on individuals and them stepping aside, but let’s be really clear, ASIC oversees the whole sector of financial services in which KPMG is absolutely deeply embedded as an auditor,” she said.
“But the audit function sits within another structure, the partnership structure, which has got nothing to do with the federal government, it’s all state law.”
A mystery KPMG witness, who oversaw the internal KPMG investigation, will also appear at the hearing. (ABC News: Maren Preuss)
The parliamentary committee has already recommended that large partnerships, like KPMG’s and other consulting firms, be regulated like companies.
“Part of the reason why they’ve gone rogue is because they operate in a grey area where they are not subject to the law,” said Professor Schmulow.
Are they facing any financial consequences?
The reputational damage has led to governments and corporates reconsidering future contracts with KPMG.
Assistant Treasurer Daniel Mulino said the government would be examining all KPMG contracts in place.
The Department of Finance told the ABC it is “taking these allegations extremely seriously and is in active conversation with KPMG on this matter”.
In a statement it says: “Finance is reserving its rights in relation to this, including the potential to suspend KPMG from the MAS Panel, or to seek a mutual agreement for KPMG not to bid for any Commonwealth work for a pre-determined period of time.”
The Reserve Bank said the firm would no longer run its whistleblower hotline.
The Victorian government is reviewing all KPMG contracts, while Queensland, NSW, the ACT and South Australia have sought more information from the firm.
Lendlease, after a 30-year relationship with KPMG, will put its external auditing contract (worth $10 million annually) out to tender next year.
