Australia’s corporate regulator will publish high-level findings from its surveillance of the Big Four audit and consulting firms before the end of the year, Australian Securities and Investments Commission (ASIC) chair Sarah Court said, as the KPMG Australia whistleblower scandal continues to reshape audit relationships.
Court made the comments in a speech on Tuesday, Bloomberg reported. She said the surveillance, which covers Deloitte, EY and PwC alongside KPMG, has focused on issues raised in the firms’ internal complaints, including by whistleblowers, and is ongoing. ASIC has said the work covers how the firms handle, use and share confidential information.
The surveillance followed allegations that Labor senator Deborah O’Neill put to Parliament in March: that confidential Lendlease board papers were used to support KPMG’s bids for audit tenders with Westpac and Dexus. Court said ASIC has also begun several inquiries and formal investigations linked to the allegations. She said the relationship between a business and its auditor depends on trust, and that the alleged behaviours broke it.
Court also pointed to limits on ASIC’s powers. The current system focuses on individual auditors and engagements and is “inadequate for regulating the large multi-disciplinary firms”, she said. ASIC would welcome a Treasury consultation on possible reforms, including stronger enforcement and disciplinary measures, and has been engaging regularly with Treasury, she added.
Client losses are mounting. ANZ said on October 2 it would tender for a new external auditor, ending a relationship with KPMG dating to 1969. The bank attributed the move to the length of the tenure rather than the scandal, said KPMG would not be eligible to tender, and expects to name a replacement by the end of April 2027. Macquarie Group reversed its decision to appoint KPMG in August. Insurance Australia Group, which has used KPMG since listing in 2000, plans to tender for a new auditor without inviting the firm, Bloomberg reported.
On the government side, KPMG agreed with the Department of Finance not to bid for new Commonwealth work in approaches to market closing between June 16 and October 31, Finance said. Existing contracts and proposals submitted before June 16 are exempt. The agreement was extended from September 30 to allow an independent review by Dr Ian Watt of the firm’s governance, culture, ethics and integrity frameworks, which was due October 9. Finance said it would provide further advice to agencies in October after the review concludes. If the review finds systemic failures in culture, integrity and ethics, Finance would propose suspending or terminating KPMG from all Commonwealth panels, according to a ministerial submission Capital Brief obtained under freedom of information laws.
KPMG has announced it will cut 27 partners and about 360 staff, roughly 5% of its workforce, after consulting revenue fell 17% to $632 million in the year to June 30. Total revenue was $2.26 billion, down 1%. New chief executive John Sams told staff the firm recognised the challenges created by its own failings. KPMG has also released an action plan that includes appointing an independent board chair for the first time.
The most direct insurance exposure sits with KPMG’s own professional indemnity insurers. If the alleged misuse of confidential information leads to claims from clients or third parties, those claims would fall to the firm’s PI programme, and ASIC’s findings, and any formal investigations that follow, could shape how they develop. Insurers are also among KPMG’s clients. IAG’s decision to tender for a new auditor shows how the scandal is reaching the industry directly, and other insurers that use KPMG for audit, actuarial or risk advisory work face similar questions about whether to change providers.
For directors and officers underwriters, the episode is a reminder of how much boards rely on auditor independence. Audit committees overseeing a change of auditor, or relying on advice from a firm under investigation, are likely to face closer questioning at renewal about how those decisions were made and documented.
For brokers whose clients include accounting and consulting practices, or boards and audit committees running auditor tenders, ASIC’s findings and any Treasury consultation will be markers to watch. The regulator’s year-end release, and the outcome of the Finance review, are the next milestones.
