Partners were told last week that their pay for the 2027 financial year would be down by 13 per cent, or 6 per cent for more junior ones, but many believe the drop will be closer to 30 per cent
KPMG rainmaker exits as Labor flags radical reform to big four firms
The corporate regulator may be given the power to police and impose hefty fines on the scandal-plagued accounting sector under new federal government plans, as KPMG suffered a further blow to its senior ranks with the exit of eight top partners.
A Treasury position paper into the regulation of auditing and consulting firms, released by Assistant Treasurer Daniel Mulino, said there was “strong and compelling evidence” that the big four firms needed tougher regulation, given the recent scandal at KPMG, where a whistleblower alleged that the firm’s auditors had misused client data from some of the country’s biggest companies, and had used inside information to win auditing work.
The big four face sweeping new regulation. Bethany Rae
“In recent years, we have seen behaviour from some large accounting, auditing and consulting firms in Australia that is not fair and honest,” said Mulino.
“This has undermined trust in the firms themselves and raised broader questions about the resilience of the frameworks meant to uphold market integrity.
“It is time to return trust and integrity so that the government, taxpayers and other businesses can rely on the services of large accounting, auditing and consulting firms.”
The KPMG scandal has already claimed the scalps of many senior executives, with the departure of chief executive Andrew Yates, chairman Martin Sheppard and three senior auditors – Eileen Hoggett, Paul Rogers and Julian McPherson – after the whistleblower’s concerns became public when they were read into federal parliament by Labor senator Deborah O’Neill in March.
Now eight partners are headed for the door, including Evan Rawstron, who managed more than $100 million in contracts and was once touted as a likely senior leader. He is leaving to join a UK boutique firm.
Rawstron led one of KPMG’s biggest profit centres as partner in charge of its government, healthcare and infrastructure consulting arm.
The KPMG scandal and the threat of tougher regulation come three years after the PwC tax leaks scandal, which involved partners at the firm sharing confidential government data.
The scandal led to the partial break-up of the group, and hundreds of partners and thousands of staff departing.
The sector is currently regulated by a mix of federal and state-based bodies, with the Tax Practitioners Board the only regulator with the power to investigate the firm.
If the sector were brought under the remit of the Australian Securities and Investments Commission, that body could be empowered to investigate and impose hefty fines on firms.
Treasury recommended that fines be imposed on accounting firms considered a “significant global entity” with more than $1 billion in turnover. This would capture the big four partnerships: PwC, EY, Deloitte and KPMG.
It would mean the firms, which all generate more than $2 billion in annual revenue, could be subject to fines of more than $200 million.
The Albanese government is also considering imposing mandatory audit terms, similar to those in the United Kingdom – a move that the sector has strenuously pushed against – and capping partnership numbers.
Treasury says ASIC could license and fine audit firms, including giving it the ability to strip a firm of registration if a single partner failed a “fit and proper” test.
Treasury also flagged proposals to manage conflicts of interest that might interfere with auditor independence.
That the conflict could be particularly acute when the culture of the consulting division was allowed to “dominate the overarching culture of the firm, and this culture may be at odds with an auditor’s role in challenging management and client perspectives”, said Treasury.
Governance standards ‘lacking’
It flagged options to reduce this conflict risk, including: banning audit firms from offering non-audit services to audit clients; forcing the firm to create a separate management structure between its audit and non-audit divisions; and, radically, forcing the firm to separate into audit-only and non-audit firms.
Treasury found governance standards lacking at the big four firms and said there was “a strong case for reforms that incentivise improved governance standards”.
Its suggestions included new “minimum governance structures” for the large partnerships with independent directors and new legal duties for key personnel.
Other ideas included limiting partnerships to 400 people in line with law firms, or requiring companies to obtain audit services only from an authorised audit company – a company structure, policed by ASIC, that has stricter rules than a partnership.
Treasury also wants to mandate that ASIC commit to a minimum level of audit quality inspection, including publishing its findings.
The corporate regulator has backed away from an earlier, stricter regime of audit inspections, and abandoned publishing individual firm results for the largest firms.
Treasury also flagged forcing companies to disclose how long they have kept the same auditor and introducing mandatory auditor tendering after 10 years and audit firm rotation after 20 years, following similar rules in the European Union and the UK.
Treasury will accept submissions about its recommendations until August 12.
The government is separately conducting a review of whistleblowing laws, while the Department of Finance is investigating KPMG’s culture and ethics.
The Albanese government had been reluctant to impose more regulation upon the big four following law and procurement changes made after the PwC leaks tax scandal, and it has taken more than two years to publish the Treasury position paper.
The paper is the result of an earlier Treasury consultation, which closed in mid-2024, and followed a parliamentary inquiry that made 40 recommendations to reform the sector.
In February, the federal government published a six-page response to the parliamentary inquiry that highlighted changes already made, including tighter procurement rules, increased penalties for tax adviser misconduct, and the strengthening of its accounting and auditing advisory bodies.
The Australian Financial Review flagged in mid-2025 that Treasury wanted to hand ASIC the power to punish big audit and consulting firms for the first time, as part of a crackdown on the sector.
Partner exodus
A summary of dozens of responses to the consultation process, published by the Financial Review in March, found the big four partnerships were effectively unregulated. It supported giving ASIC the power to sanction firms, as opposed to individuals.
The departure of KPMG’s senior consulting partner Evan Rawstron, reinforces fears among partners at that firm that government sector work could dry up beyond a self-imposed three-month ban on bidding for new work while the federal Department of Finance investigates the firm’s ethics and culture.
Another seven partners are resigning from or have quit the consulting business, worsening the hit of the audit leaks scandal on KPMG’s bottom line.
KPMG could not confirm the departures, given the number of partner movements that typically come at the end of the financial year. However, the Financial Review understands that many of these departures are because of the firm’s botched handling of the scandal.
The resignations are the first senior losses over the saga, excluding forced exits. However, dozens of partners and senior staff, especially those based in Canberra, have been seeking alternative work for months.
KPMG International even imposed a block on partners leaving this month amid concerns of an exodus during peak audit season.
Partners were told last week that their pay for the 2027 financial year would be down by 13 per cent, or 6 per cent for more junior ones, but many believe the drop will be closer to 30 per cent.
A mass departure of senior partners would further sting, given the lucrative “retirement scheme” that grants long-serving partners a one-off payment worth about a year’s pay.
The amount is based on a partner’s past five years’ earnings, and some are keen to leave before this amount is affected by the scandal’s hit on earnings.
Internally, there is also frustration about the generosity of the policy, as it means those who stay will effectively subsidise the payouts of partners who leave.
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