KPMG chief resigns after firm admits whistleblower probe fell short

KPMG Australia has admitted its treatment of a whistleblower and investigation into their allegations fell short of the firm's expectations, those of the whistleblower and the broader community.

The whistleblower had raised two matters on client documents being inappropriately shared internally as well as an inappropriate remark in a team setting regarding the sharing of the client information.

As a consequence, KPMG chief executive Andrew Yates along with the national managing partner of audit and assurance Julian McPherson have resigned from their positions on May 29.

While the board has appointed Stan Stavros as interim chief executive of KPMG Australia, the consulting giant said the national managing partner of audit and assurance will be announced shortly.

"I have been committed to a speak-up culture in our firm, it is clear that in this case we have let ourselves down and I take accountability," Yates said.

A parliamentary investigation into the whistleblower allegations is currently being led by Senator Deborah O'Neill.

Speaking at the Senate Chamber on March 24, O'Neill detailed some of the allegations against KPMG by whistleblower including misappropriation of confidential Lendlease board papers which were used by KPMG to pursue major audit tenders including Westpac and Dexus. She also mentioned serious concerns regarding independence and integrity during the pursuit of the Macquarie audit contract.

KPMG said the initial internal investigation, that did not substantiate the allegations raised by the whistleblower, was not conducted with the necessary rigour required.

This prompted further allegations from the whistleblower which then resulted in the appointment of an external legal firm to review the internal investigation.

The external legal review supported the internal investigation which led the whistleblower to further raise the matter with certain independent members of the KPMG Australia board.

At that point, the board appointed Allens to conduct a further external legal investigation, which KPMG said remains ongoing.

The board identified that KPMG Australia fell short in managing the whistleblower and their concerns, the rigour of the investigations and action by leadership regarding the allegations raised.

KPMG chair Martin Sheppard said: "We acknowledge we have work to do to rebuild trust. That's why we are not asking anyone to take our word for it, and we are inviting scrutiny and challenge on our remedial actions."

Sheppard added along with Allens, the firm has appointed Principia Advisory, a global specialist in ethical culture, to undertake an external review of the underlying speak up culture, including the policies and processes that support this.

"We apologise unreservedly to the whistleblower. We commit to learning from this process to ensure we create an environment where it is safe and easy to surface concerns that will be acted upon," Sheppard said.

"KPMG apologises to the clients whose information was not handled with the care and respect they expect from us. We also apologise to our people - as these matters do not reflect on the contribution they make to KPMG and our clients."

He added KPMG will publish the findings of the Principia review and move swiftly to act upon their recommendations.

"We are reinforcing and strengthening the controls that protect client confidentiality, and we will set out for our clients the specific steps we are taking to keep their information protected. For each of our audit clients we will confirm that any conduct matters do not impact the quality of their audits," he said.