Federal government's suspension on new contract engagements with KPMG extended until February 2027
A government-commissioned review of KPMG Australia has found that the Big Four firm failed to appropriately respond to whistleblower concerns, reflecting broader weaknesses in the its culture, governance and accountability arrangements.
The independent review, carried out by Dr Ian Watt AC, was commissioned by the Department of Finance amid a scandal involving KPMG where it allegedly misused client information and retaliated against a protected whistleblower following formal disclosure, among other allegations.
"KPMG mishandled the whistleblower matter," the review read. "Its response was misguided, fragmented, prolonged and, at critical points, lacked clear ownership."
It pointed out that KPMG dealt with the whistleblower's disclosure as an "employment matter," even though it included alleged broader unethical conduct stemming from commercial pressure, fear of retaliation and a weak speak-up culture.
"The firm focused more heavily on the legal status of the disclosure, the allegations and the risks to the organisation than on the practical protection and support that should be provided to the person raising the concerns, and too little on the possibility that the whistleblower's broader allegations might be correct," the report added.
It concluded that KPMG's whistleblower framework was not fit for purpose in its application.
"The firm had policies and reporting channels, but their existence did not make them effective," the report read.
"The available pathways did not appear sufficiently independent or provide the whistleblower with confidence that the disclosure would be treated seriously and that protection from detriment would follow."
The report, however, stopped short of concluding that its findings reflected everyone at KPMG.
"The whistleblower told the Independent Reviewer that the great majority of the firm's people (99 per cent in their words) were good people who took their responsibilities to clients, government and the public interest seriously," it read.
"The Report instead properly focuses on failures of leadership, culture, governance and accountability."
Federal ban on KPMG extended
Meanwhile, the government's suspension on new federal contracts with KPMG has been extended to February 2027.
The review stopped short of treating KPMG as "permanently unsuitable" for Commonwealth work. It maintained, however, that confidence cannot be immediately restored despite the firm's recent actions.
KPMG has initiated an action plan to address the issues that surfaced following the whistleblower's revelations, including the introduction of a new set of leaders, including new CEO John Sams, to deal with the fallout from the scandal.
The firm has also taken disciplinary actions, commissioned further external reviews, accepted their findings, and started efforts to repair relationships with the whistleblower and its clients.
"These steps are important, but alone, they are not sufficient," the review read. "Lasting remediation will require disciplined implementation, independent assurance, transparency reporting, and evidence that reforms are changing behaviour in practice. Trust cannot be restored through commitments or structural changes alone."
KPMG has faced various consequences in the fallout of its audit scandal, including the departure of various executives, including former CEO Andrew Yates. It also saw partner departures, workforce reductions and significant reputational damage.
KPMG accepts review's findings
In a statement, KPMG said it accepts the findings and the recommendations of the government-commissioned review.
"We recognise that confidence must be earned through evidence of effective, lasting change and are committed to acting on the Independent Review's recommendations, along with full and transparent implementation of the other activities identified in our Action Plan," the statement from Sams and Independent Chairman Michael Ebeid read.
KPMG also agreed to pause bidding for new Commonwealth work until 28 February 2027.
"We have also committed to working with the Department of Finance to agree an Implementation Plan, reporting regime and other activities over the coming weeks and months," it added.
