Any such move would be devastating to KPMG’s audit division and would call into question the firm’s recent wins of contracts to audit Macquarie Group, Wesfarmers and Brambles, worth almost $100 million a year, but which are yet to be approved by those companies’ respective shareholders.
Also on Friday, the government said it would reopen an examination of how large partnerships are governed, as the growing data-misuse scandal threatens to engulf the entire professional services industry
The federal finance department has formally declared the scandal a “significant event”. Under strict rules introduced after PwC’s tax leaks scandal to ensure timely disclosure, public sector clients can now demand that KPMG guarantee that no personnel working on their projects are linked to the misconduct.
Crisis goes global
The crisis was triggered by a whistleblower – a former audit director – who came forward internally in May 2024. The core of the allegations is that KPMG partners misused confidential Lendlease board papers to pitch for and win the external corporate audits of Westpac and Dexus. Inside information was also allegedly used to secure lucrative work from Macquarie Group and Westpac.
The firm’s crisis has also gone global after details emerged of the whistleblower’s extensive efforts to have KPMG International investigate his allegations in 2025, following the local firm’s failure to act.
KPMG International, which will soon be run by former KPMG Australia chief executive Gary Wingrove, refused to provide the whistleblower with legal protection, denied having the authority to intervene and directed him back to the local firm.
KPMG only signed on as Westpac’s auditor in 2024, changing over from PwC, which held the role for more than 50 years. The big four auditor has so far signed off on only one annual report, for the 2024-25 financial year.
The bank’s annual audit is highly coveted by accounting firms as the third-most lucrative in the banking sector, behind that of Commonwealth Bank and Macquarie. The board of Westpac has existing links to KPMG, with Peter Nash, the chairman of the bank’s audit committee and a non-executive director, having spent almost 25 years at the firm, including a stint as its chairman between 2011 and 2017.
Separately, Assistant Treasurer Daniel Mulino told AFR Weekend that the severity of the allegations prompted him to reopen a broader look at partnership governance structures.
“These are very serious allegations. I think it’s really appropriate that the Department of Finance has taken the steps that it has in relation to existing contracts,” Mulino said.
“Where individuals are identified as being associated with those matters ... mitigation steps may be required and entities can work through those with KPMG.”
ASIC investigation
Australian Securities and Investments Commission chair Sarah Court told parliament on Friday that the regulator has had “significant” interaction with KPMG at its most senior levels during its ongoing investigation into the allegations.
Three of the four KPMG partners sanctioned so far over the allegations are registered auditors, bringing them under the jurisdiction of ASIC. The commission confirmed it was investigating audit partner Paul Rogers, along with Hoggett.
Rogers has been removed as the co-signing partner of the Lendlease audit and as an auditor working on the Dexus audit. Hoggett was removed as the signing partner for the Dexus audit on Thursday.
Mulino said the government was “stepping through all the core recommendations” of the existing proposals from earlier inquiries that have stalled.
Those changes include capping the number of partners at 400 at Deloitte, EY, KPMG and PwC – which range up to almost 700 partners – bringing these firms into line with law firms. Other ideas include bringing the large partnership under the Corporations Act and giving ASIC the power to take action against the firms, as well as individuals
“So we’re stepping through all the core recommendations of that report ... we’re also dealing with whistleblower issues, and we’re in the middle of receiving submissions on those issues,” Mulino said.
“When it comes to the other issues, I am considering those other recommendations and will obviously take into account the events that have recently come to light in considering those other recommendations.”
Canberra operations face revenue cliff
KPMG’s Canberra operation was already bracing for a June 30 revenue cliff, given dozens of separate multi-year government contracts worth $330 million are set to expire at the end of this month, according to the government’s tender database.
Treasury and the Reserve Bank of Australia were already forced to defend hiring the firm in parliamentary hearings on Thursday, and last week, Finance officials warned that the firm could be banned from bidding for new work for breaching the notification rules.
Within KPMG’s Canberra operation, there are now new fears that federal contracts that would once be extended as a matter of normal business will now be allowed to expire. This adds to existing concerns that an unofficial ban on KPMG has now taken hold at the federal and state levels.
The developments will accelerate moves by dozens of KPMG partners, especially those based in Canberra, to find alternative work. The firm’s leadership has been reassuring the partnership that partners are not seeking to leave the firm and that the matter is being handled.
A dozen current and former partners – including chairman Sheppard, former chief executive Yates, who resigned last Friday, McPherson, Hoggett and Rogers – have been summoned to appear before a federal parliamentary inquiry on June 19.
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