Sydney’s rejuvenated harbour front precinct, Barangaroo, offers some of the most expensive real estate in the country. The offices of Australia’s business elite are nestled in just a stone’s throw from rich-lister neighbours sitting atop Crown’s Sydney casino.
To be able to afford office space in this precinct, you have to do something very lucrative, very well.
For Australia’s multi-billion dollar consulting industry, which provides two significant tenants at Barangaroo, it is providing the audit work that every Australian business must get to assure everyone that their financial accounts are credible.
Everyone with an investment or a super fund relies on their important work.
The implosion of former $2.3 billion sharemarket giant Corporate Travel Management, after its auditors discovered it had overcharged the British government as much as $240 million, is a case in point. As the Australian travel company’s woes have deepened, some have slashed their valuation of the business to zero.
Sensitive government departments such as the tax office and the federal police all use auditors’ services extensively.
For KPMG, one of the largest tenants in the multi-billion-dollar Barangaroo development, it underlines the fact that their financial superpower is a reputation for integrity, independence and iron-clad confidentiality.
You don’t need much imagination to understand what happens when this reputation gets tarnished.
KPMG’s Barangaroo neighbour and rival, PwC, shed lucrative clients and hundreds of staff and it was forced to spin off its entire government business for $1 after a tax leaks scandal erupted in 2023 alleging the firm had used confidential government tax plans to help recruit new clients.
In this context, it is easy to understand why it has taken two years for explosive claims by a former employee turned whistleblower to surface publicly. Critics also allege KPMG has been too slow to investigate the allegations, to say the least.
Last week, the scandal cost KPMG Australia boss Andrew Yates his job. The same goes for audit boss Julian McPherson. Yates and McPherson have abruptly resigned after the company confirmed confidential client data had been shared and potentially used to win new business with other clients.
This week, the carnage continued when Yates’ heir apparent Eileen Hoggett stepped down from executive duties while an investigation into the scandal continues.
Lendlease – which has had KPMG as its auditor since Robert Menzies was prime minister and is headquartered at Barangaroo, which it developed – has also signalled that it is preparing to cut all ties with the firm.
“It is not appropriate to make a change in auditors this close to financial year end. We will be reviewing our audit services following the completion of FY26 reporting,” a spokeswoman said.
A day later, another major client, property giant Dexus, publicly stated it did not want Hoggett signing off its financial accounts, which are being finalised.
One of the most colourful allegations, which became public in March when Labor MP Deborah O’Neill raised the whistleblower allegations in a Senate speech, perfectly illustrates the reason for the carnage.
The story involves a laptop and a lunch break in a scene that could have been written for Hollywood casino caper, Ocean’s Eleven.
According to the whistleblower’s account, the day before the 2023 Melbourne Cup, a KPMG executive providing services for Dexus casually announced he was going to lunch and walked out with sensitive Dexus documents open on his laptop.
This allegedly orchestrated arrangement meant KPMG staff from a different part of the firm, who were pitching for Dexus’s multi-million dollar external audit business, could gain access to this sensitive information against the express wishes of Dexus.
KPMG’s response has been that its investigations had turned up an “inappropriate informal remark in a team setting” for which the individual had been reprimanded. In plain terms, he made a joke.
This matter is being re-investigated, which is a pretty significant caveat given what has already emerged.
Was the laptop left open in a room with employees who were forbidden to have access to any of this Dexus information? It is the sort of conflict management that is mandatory for a professional firm dealing with the most sensitive client information and internal teams with conflicting motives.
ASIC has confirmed it is investigating individual KPMG staff mentioned in the allegations, which is as far as its authority extends.
KPMG will need to do better to shield the firm from allegations cited by O’Neill, which include the “misuse of confidential information, corruption of ASX audit tender processes” and allegations that KPMG retaliated against the whistleblower for raising these concerns.
“There are clear allegations here of profoundly unprofessional and unethical behaviour,” she said.
By the time this came to light, KPMG had already won the Dexus contract, from PwC. It is due to sign off on the accounts for the financial year ending this month in what are now very controversial circumstances.
A Dexus spokeswoman said: “As soon as we became aware of this matter, we engaged directly with KPMG at board and executive level, and this active engagement is ongoing.
“We take this matter seriously and are committed to ensuring the integrity and independence of our external auditor arrangements. We confirm Dexus will have a new signing partner for its FY26 accounts.”
For KPMG, it is a reminder that the allegations – and the impact – are starting to echo the tax leaks scandal at rival PwC, which was already feeling the blows as the laptop incident played out.
Just days after the 2023 lunch incident, Westpac announced it would dump PwC as its auditor. It put it out to tender for business that generated $70 million in fees over the previous two years alone.
Hours later, PwC announced hundreds of staff would lose their jobs due to the scandal and its impact.
The Westpac tender was won by KPMG, another contract win that features in the whistleblower’s allegations. So does the most lucrative audit business in Australia, Macquarie Group, which is currently handing its $70 million a year business to KPMG, if shareholders approve the change.
Another serious allegation raised by the whistleblower related to Lendlease and access to the most sensitive documents inside any corporation: boardroom documents that are normally privy to directors, and occasionally, senior executives and trusted advisors.
The documents, which KPMG auditors were not meant to have access to, concerned deliberations on whether Lendlease should put its audit work out to tender. The importance of the information went beyond KPMG’s lucrative work at the group.
A letter from Lendlease chief executive Tony Lombardo in late April to a parliamentary joint committee chaired by O’Neill confirmed that KPMG first made it aware of whistleblower allegations in May last year – that sensitive board papers had been accessed by its audit partners to win work with other clients – but KPMG said it was satisfied there was “no issue”.
After O’Neill aired the whistleblower’s allegations in March, KPMG told Lendlease that one of its audit partners had actually accessed the board papers but the consulting group deemed the documents to be of “low sensitivity” that gave it “zero competitive advantage”.
This matter is also being re-examined in an external investigation by law firm Allens.
“Lendlease has advised KPMG that the actions of its employees are not acceptable and is in discussions with KPMG as to the action to be taken,” Lombardo said in the letter to a parliamentary committee.
That was in April. This week Lendlease began the process of finding a new auditor for work worth about $10 million a year.
The big question for many is why it took almost two years for the whistleblower’s complaint to finally surface.
KPMG is not saying why it took this long. But O’Neill says she believes the firm has used “every legal tool at their disposal to gaslight the whistleblower and to prevent the proper investigation of the matters that were raised”.
Significantly, as recently as May 14, KPMG was referring to the person making the allegations as a “former employee” rather than a whistleblower. The fact it did not use the word whistleblower for two years is telling. Once a company recognises a staff member as a whistleblower, there are protections for the employee under corporate law.
Despite KPMG offering whistleblower services to corporate clients, which face serious consequences under the Corporations Act if they breach whistleblower protections, partnerships like KPMG are not covered by these laws.
The complainant first made KPMG aware of the allegations in May 2024 and sought protection as a whistleblower.
KPMG confirmed that it recognised the former employee as a whistleblower last Friday when Yates resigned. It is now offering whistleblower protections. An announcement from KPMG just weeks earlier does not refer to the former employee as a whistleblower.
It has been a long slog for the whistleblower, who endured an internal investigation in 2024 that found no evidence of wrongdoing by the firm. This was followed by a “review of the internal investigation” by law firm Ashurst, which supported the initial findings.
The whistleblower took the only step available, raising his concerns with high-profile KPMG board members like former NSW premier and current Cricket Australia chairman Mike Baird, in August last year.
Legal firm Allens was then hired for a separate external investigation, which finally confirmed some of the 38 allegations.
It was a matter uncovered by Allens against KPMG staff last week that triggered the departure of Yates and McPherson. Highly sensitive Optus audit information had allegedly been leaked to another team at the firm, which was bidding for rival Telstra’s account.
Yates and McPherson won’t be the only departures. As we know from PwC, many innocent staff can expect to lose their jobs if parts of the firm lose business as a result of the scandal.
The NSW and Victorian governments have already announced that they are scrutinising their multimillion-dollar relationships with KPMG.
On Friday, the federal government also indicated it would put its contracts with KMPG under the microscope, declaring a “significant event” that the Finance Department is assessing.
Last week, Finance Department officials told Senate estimates that they had already warned KPMG Australia it could be banned from bidding for contracts after the firm had repeatedly failed to notify officials about wide-ranging allegations of client data misuse.
And there will be much more to come.
O’Neill is dragging everyone she can before a public senate hearing on June 19 to unearth more details of what exactly happened at KPMG.
The hearing is expected to be just as uncomfortable as the inquiry that uncovered the PwC misdeeds.
“There’s a real awakening by corporate Australia that the practices they saw being perpetrated on the government (by PwC) … being perpetrated on some of the biggest companies in the nation,” she said.
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