KPMG Australia chair Martin Sheppard resigns, leadership overhauled amid audit leaks scandal
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More news: The Department of Finance has approached former senior public servant Ian Watt to conduct the independent review into KPMG Australia’s ethical soundness, according to correspondence from the department and the Parliamentary Joint Committee on Corporations and Financial Services.
Watt has previously served as secretary of multiple federal government agencies, including Prime Minister and Cabinet, Finance, Defence and Communications.
The correspondence noted the terms of reference of the review, which include:
- Relevant aspects of KPMG’s culture, ethics and integrity, and the effectiveness of its governance arrangements;
- Adequacy of KPMG’s remedial activities to meet the Commonwealth’s ethical expectations of suppliers; and
- The Australian Government’s procurement and contract management processes to identify and manage unethical behaviour by suppliers.
The department said the review will provide advice on KPMG’s future suitability for the delivery of work to the federal government.
It will also include advice on the effectiveness of KPMG’s issue management processes with particular regard to whether KPMG’s response, escalation and disclosure processes to the government were timely, appropriate and effective.
The review is expected to be provided to the department by 30 September.
KPMG Australia chair Martin Sheppard resigns, leadership overhauled amid audit leaks scandal
The news: KPMG Australia has announced chair Martin Sheppard and two senior audit partners will resign after a scandal embroiled the firm over its misuse of sensitive client information.
“National chairman Martin Sheppard supports the need for a change in governance, including an independent chair and has announced that he will leave the firm shortly. A short transition period will assist a smooth handover. He will also retire from his regional board responsibilities,” KPMG said in a statement.
Two audit partners, former chief operating officer Eileen Hoggett and Paul Rogers, are also leaving. A process is underway to find a new CEO while an independent third party has been hired to review the saga that was ignited by a KPMG whistleblower.
It comes as part of a KPMG Australia action plan to overhaul governance at the firm, including appointing an independent chair and independent members to the Australian board.
Those independent board members will be granted oversight over key subcommittees including audit quality, ethics, whistleblower oversight and other “matters of public interest”.
A separate “lessons-learned” review will be conducted into KPMG’s whistleblowing processes, including new measures to discourage misconduct and clear guidelines for how to manage and escalate whistleblower disclosures.
Controls will be implemented to prevent further misconduct and breaches of client confidentiality, and strengthen ethical conduct, the firm said, noting some areas remained subject to partner approval.
What they said: “The decisions announced today are necessary and immediate. We did not meet the standards expected of us, and we recognise the impact this has had on the whistleblower, our people, our clients and the community,” interim chief executive Stan Stavros said.
“Trust will only be rebuilt through sustained action and demonstrable change. We are determined to confront what went wrong, act transparently and ensure these failings are not repeated.”
“The Parliamentary Committee’s enquiries highlighted issues, including unethical behaviour by senior personnel and the human impact of KPMG’s handling of the whistleblower. KPMG Australia is focused on ensuring those failings are understood, addressed and not repeated,” he said.
The context: The departures follow the exit of chief executive Andrew Yates and national managing partner for audit and assurance Julian McPherson.
KPMG whistleblower allegations emerged publicly in March, alleging KPMG had accessed sensitive client information and used it to win contracts.
An Allens investigation this week confirmed KPMG had repeatedly misused confidential files, including pitch documents rival audit firms PwC and EY had submitted to the Lendlease board.
The unidentified whistleblower made disclosures internally in May 2024 which became public in March of this year when Labor senator Deborah O’Neill raised them in Parliament. Last week the whistleblower revealed they had been targeted as a result and threatened with termination.
While KPMG claimed it had used Ashurst to investigate the claims, the Parliamentary Joint Committee learned on Friday it had been instructed to review KPMG’s internal investigation on “work-related grievances”. KPMG then tasked Allens into looking into “certain allegations”.
Clients including the Reserve Bank have since indicated they will walk away from firm with the CSIRO, AEC, BoM and the ATO all demanding KPMG confirm their data has not been misused
The sources: KPMG, PJC
