New review comes amid calls for stronger regulation of accounting sector following the KPMG scandal
The Australian Securities and Investments Commission (ASIC) is reviewing how big four consulting firms are handling internal complaints, according to reports, following an audit leaks scandal at KPMG that saw the departure of its top executives.
ASIC will look into the internal complaints received by KPMG, Deloitte, EY, and PwC, including whistleblower complaints, in connection with the external audit services they provide, Reuters reported.
The corporate regulator will also review whether the big four firms received complaints about the misconduct committed by their auditors, such as misuse or sharing of confidential information.
The accounting firms have yet to release a public statement regarding ASIC's investigation, but the Australian Financial Review reported that they were already asked to hand over documents relating to their treatment of internal complaints.
Partially regulated accounting sector
ASIC's investigation comes as it acknowledged its limited powers when it comes to regulating the accounting sector, the AFR reported.
"ASIC's jurisdiction in relation to audit firms, as opposed to individual auditors, is limited," said ASIC chair Sarah Court in a statement quoted by the news outlet.
"We can generally only investigate certain individuals within a partnership, registered company auditors, and only in relation to their conduct of an audit."
ASIC is already investigating the conduct of three registered auditors, including former KPMG chief operating officer Eileen Hoggett and former senior audit partner Paul Rogers, who were tagged in the alleged misuse of Lendlease board papers.
Court said they have called for reforms "to extend provisions of the Corporations Act to audit firms and to increase the sanctions available for breaches."
The regulator also called for extended whistleblower protections to people seeking to make disclosures within partnerships, such as KPMG.
"Strong protections are essential if misconduct is to be identified, escalated, and addressed," Court said.
The scandal at the Big Four firm erupted after a whistleblower approached Senator Deborah O'Neill, who exposed the allegations in the Senate, after KPMG's initial internal and external probes had found the allegations unsubstantiated.
The whistleblower claimed that KPMG misused confidential client information to win audit contracts with other firms clients. The scandal has led to the exit of top executives, including CEO Andrew Yates and board chair Martin Sheppard.
KPMG has already committed to an independent review of its whistleblowing system, which will be conducted by Principia Advisory.
At the same time, it is also being investigated by the Tax Practitioners Board, the federal Department of Finance, the New South Wales government, and Chartered Accountants Australia and New Zealand.
