It’s a dead-heat in the competition for KPMG’s worst sin. The contenders are firstly, that it leaked confidential client information to win new corporate accounts, and secondly, its cascading attempts to cover up the scandal.
It has taken more than two years and the tenacity of a relentless whistleblower for the first serious signs of sunlight’s antiseptic to be applied to what is a growing list of alleged instances in which private information of KPMG clients was used/abused to win other large service contracts, including auditing work.
But KPMG’s ability to audit its own behaviour has come up woefully short.
How can it offer services it markets to customers to advise on the establishment and robust working of their whistleblower functions, when its own structure has failed epically?
Thanks to the snowballing, albeit belated, interest among lawmakers and regulators now on board to dig up KPMG’s weeds, we won’t need to rely on the firm’s own introspection.
Labor senator Deborah O’Neill has found a worthy behavioral lightning rod for the parliamentary committee on financial services she chairs. Already she is warning the firm about seeking the legal cover of professional privilege to avoid uncovering the depths of the scandal.
The Australian Securities and Investments Commission has said it will undertake its own investigation, and so will the Tax Practitioners Board and Chartered Accountants ANZ.
It could be years before this scandal is fully picked over and the last of the heads have rolled.
Trust is a precious commodity in the accounting and consulting industry, which is dominated by four large players. When PwC’s abuse of it was laid bare three years ago after it was outed for using secret government tax policy plans to help multinational companies avoid tax, community outrage was palpable.
Despite the three other firms including KPMG standing piously by their ethical bona fides at the time, while capturing account run-off from PwC, that scandal led to a sector stink.
Clients and the community alike are not gaping in awe that another major accounting/consulting enterprise is the subject of a major scandal, the likes of which has allegedly caught clients from Macquarie Group to Westpac and Lendlease to Dexus.
It has been alleged, and not denied by KPMG, that board papers from property giant Lendlease were shared within KPMG to aid in its sales pitch to other clients. It has also been alleged that private material about its client Optus was used in an attempt to grab Telstra as a client.
Already Lendlease has stated publicly that it will be reviewing a decades long audit services contract with KPMG for the coming financial year.
These are large fish in Australia’s small corporate pond, and the ramifications for KPMG’s ability to retain existing clients or snag new ones are serious and potentially very costly.
On Friday, the firm announced the abrupt departure of its Australian chief executive, Andrew Yates, and the national managing partner of audit, Julian McPherson. Yates declared he had been committed to a speak-up culture and that the firm had let itself down.
Two major law firms had been brought in to investigate the whistleblower’s accusations – only for both to conclude there was nothing to see here.
Too often when outside investigations are commissioned, the outsiders effectively provide defence cover and wind up concluding what the client wants to hear.
The second of the law firms, Allens, is now taking a deeper dive after O’Neill raised the allegations in a Senate speech in March, citing “misuse of confidential information, corruption of ASX audit tender processes”. She also chastised KPMG for its retaliation against the whistleblower for raising these concerns.
The saga hasn’t yet reached peak damage. That will happen if or when clients start heading for the exit.
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