KPMG Australia Scandal Heats Up With Reckoning in Parliament

More than 30 people, including current and former senior KPMG personnel as well as its customers, lawyers and board members, are set to testify in Canberra for an ethics and professional accountability hearing.

KPMG is alleged to have misused confidential information from property developer Lendlease Group to win contracts with other corporate clients including Westpac Banking Corp. and real estate manager Dexus, according to details outlined under parliamentary privilege in March. KPMG has admitted its treatment of a whistleblower and an investigation into the allegations fell short of the firm's standards and lacked rigor.

Among the first to testify, Lendlease chair John Gillam said the resulting disruption has created additional costs for the firm as it engages with KPMG to understand what happened with their information.

"What is apparent is a few senior people have had a grave misuse of access privilege they had as a fundamental breach of trust," Gillam said.

Others testifying include former KPMG Chief Executive Officer Andrew Yates as well as ex-national managing partner of audit and assurance, Julian McPherson.

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Ainslie van Onselen, Chief Executive Officer of Chartered Accountants Australia & New Zealand, faced a barrage of questions about her organization's interactions with KPMG leadership.

"Confidentiality of client documents is non-negotiable," van Onselen said, adding that her organization was "deeply disappointed," given the claims "are at the heart of trust in audit."

The scrutiny comes in the wake of another fiasco in the sector, after PwC's Australia division was banned from bidding for new government work and its embattled public consulting business was jettisoned in 2023 for a dollar.

"The PwC scandal and now the KPMG scandal really raise questions about the systemic regulation of these very large partnerships," Barbara Pocock, a senator for the Australian Greens party, said prior to the hearing. "Their leadership and their culture have been exposed as open to unethical practices and really poor treatment of whistleblowers," Pocock said.

Pocock is pushing for the government to require the separation of audit and consulting businesses. She also wants to wind back the ability for audit firms with up to 1,000 partners to operate under a partnership model, which allows them to avoid meeting the requirements of the Corporations Act.

Such a move would bring them in line with other large businesses in terms of tax, accountability and whistleblower protections, she said. Pocock has also called for all 297 KPMG government contracts worth A$653 million ($458 million) to be frozen pending an investigation into the company. Her party this week referred the firm to the National Anti-Corruption Commission for suspected corruption breaches.

On Monday, KPMG Australia agreed not to bid for new federal government contracts for three months, during which time the government's finance department will conduct a review of the firm. The firm said in a statement then that it acknowledges individuals have made mistakes, but "those failings do not reflect the overwhelming majority of our partners and people."

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The persistent run of scandals across audit and consulting firms in Australia has also prompted further questions about why governments have shown little appetite to tighten laws and regulators under which these firms operate.

"After the PwC tax leaks scandal, there was a lot of political and policy focus," Brendan Lyon, a former KPMG Australia partner who is now a professor of practice at the University of Wollongong, said prior to Friday's hearing. "That moved on quickly and the result was that no changes in law or regulation occurred," he said.

The allegations against KPMG have triggered a formal investigation by the country's corporate watchdog. Some clients in Australia have also voiced concern over the misconduct allegations, including the Reserve Bank of Australia which has indicated it will not renew KPMG as the operator of a whistleblower hotline service.

"The situation with KPMG is not exactly a unique situation for Australia, nor for the firm itself," said Tom Rodenhauser, managing partner of K2 Consulting Research, which tracks the sector. "Clients usually give consultants a pass when rogue partners are outed for unethical behavior. But if clients find their consultants in repeated scandals, they'll start looking elsewhere."