KPMG Australia chair, partners to exit in reset from scandal

[MELBOURNE] KPMG Australia said that chair Martin Sheppard and two other audit partners will leave as part of a broad restructuring, following whistleblower allegations that the firm used confidential client information to help win business.

Sheppard will depart shortly and retire from his regional board responsibilities, the firm said on Tuesday (Jun 23). Audit partners Paul Rogers and Eileen Hoggett will also leave the firm, it added.

Efforts to appoint a new CEO were progressing, KPMG said, which would “refresh the executive team and ensure the firm has strong, ethical leadership for the future”.

The senior departures mark a widening list of casualties from the scandal that emerged in March when allegations were first unveiled under parliamentary privilege.

That included KPMG staff inappropriately using Lendlease board documents to support bids for business from Dexus, a property company, and Westpac Banking.

The latest senior exits follow from former CEO Andrew Yates and the firm’s national managing partner for audit and assurance, Julian McPherson, who stepped down from the firm amid the broadening controversy.

Australia’s corporate watchdog has opened an investigation into the claims, while KPMG Australia has agreed to not bid for new federal government work for three months.

On Friday, Australian lawmakers grilled senior current and former KPMG staff during a parliamentary hearing, heightening calls for tighter regulatory and legal guardrails for the audit and consulting industry.

The sector had been hit three years ago by revelations that PwC leaked confidential government information to corporate clients, eventually leading to the firm’s embattled public consulting business being jettisoned for a dollar.

SEE ALSO

KPMG Australia spars with lawmakers amid probe into scandal

KPMG scandal deepens Big Four accounting firms’ woes in Australia

Scandal-hit KPMG Australia will not bid for new federal work until end-September

Lendlease seeks new auditor as KPMG Australia faces regulatory probe

KPMG Australia fallout widens as RBA, pension reassess

KPMG Australia COO steps down amid growing audit client leak scandal

More

Barbara Pocock, a senator for the Australian Greens party, called for audit and consulting businesses to be separated and for companies within the sector to fall under the purview of the Corporations Act.

“KPMG’s governance is nothing short of a train wreck and Sheppard, chairman of the board, needs to share responsibility with the past CEO Yates and resign,” Pocock had said on Friday.

Some surprises that emerged during the hearing included a partner from a law firm, KPMG said was tasked with reviewing the whistleblower allegations, saying that was not the scope of the work, casting doubt on the audit firm’s handling of the claims.

Lawmakers also questioned former KPMG executives about whether the whistleblower was pressured to sign a deed of separation from the firm under the threat of dismissal, which they denied.

KPMG Australia said on Tuesday that it would pursue “a major governance restructure” and an action plan focused on governance, culture and ethics, as well as controls.

This included the appointment of its first independent chair, and additional independent directors, together with hiring a third-party to undertake an immediate review into the whistleblower matter.

The firm, which employs about 9,000 people, including close to 700 partners, reported revenue of more than A$2 billion (S$1.8 billion) in the financial year ended Jun 30 last year.

“We did not meet the standards expected of us,” said Stan Stavros, interim CEO for KPMG Australia.

He noted “unethical behaviour by senior personnel and the human impact of KPMG’s handling of the whistleblower” as among the shortcomings raised during Friday’s hearing. “KPMG Australia is focused on ensuring those failings are understood, addressed and not repeated.” BLOOMBERG