KPMG details action plan to address whistleblower probe

KPMG has detailed a governance overhaul and action plan to address integrity issues across the firm after it admitted its treatment of a whistleblower and investigation into their allegations fell short.

In effect to this, KPMG national chair Martin Sheppard has announced that he will leave the firm shortly and retire from his regional board responsibilities. Two audit partners, Paul Rogers and Eileen Hoggett, are also leaving the firm.

This follows the resignation of KPMG chief executive Andrew Yates along with the national managing partner of audit and assurance Julian McPherson from their positions on May 29.

KPMG said it will overhaul its governance arrangements, including appointing its first independent chair. It will also appoint independent members to the Australian board and ensure a balance between KPMG representatives and independents.

The firm will review and update the board's role and remit in line with corporate governance best practice. This will include involving independent board members in new sub-committees focused on priority areas such as audit quality, ethics, whistleblower oversight and other matters of public interest.

KPMG interim chief executive Stan Stavros said: "The decisions announced today are necessary and immediate. We did not meet the standards expected of us, and we recognise the impact this has had on the whistleblower, our people, our clients and the community."

"We are acting where it matters: changing leadership, strengthening independent governance, commissioning external reviews, improving whistleblower oversight, tightening controls and reinforcing accountability across the firm."

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

KPMG said the parliamentary inquiry has shone the light on its failings, including unethical behaviour by senior people, and the human impact of its handling of the whistleblower.

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 will engage an external third-party to undertake a "lessons-learned review" to assess the failings in handling the whistleblower and identify steps that could be taken to ensure such failings do not recur.

The government has also opened consultation on a review of corporate whistleblowing laws in Australia to ensure they are working to effectively protect whistleblowers.

The consultation considers financial incentives for whistleblowers. Currently, the regime does not include financial incentives or rewards for whistleblowers as it relies on perceived moral and civic obligations.

"Trust will only be rebuilt through sustained action and demonstrable change. We are determined to confront what went wrong, act transparently and ensure these failings are not repeated," Stavros said.

"The parliamentary committee's enquiries highlighted issues, including unethical behaviour by senior personnel and the human impact of KPMG's handling of the whistleblower. KPMG Australia is focused on ensuring those failings are understood, addressed and not repeated."