Deborah O'Neill (NSW, Australian Labor Party) Share this | Link to this | Hansard source

I start my remarks this evening with a quote:

In a large hierarchical organisation there is reticence of people to put their hand up … People need to be confident that, if they put their hand up, someone is going to investigate it; that if it's substantiated someone is going to take action and they're going to be protected if they put their hand up.

These words are from Mr Andrew Yates, the Chief Executive Officer of KPMG Australia, giving evidence to the Senate's Finance and Public Administration References Committee inquiry into the big four consulting firms on 27 September 2023. What I want to bring to the attention of the Senate tonight is evidence from a whistleblower, a former senior executive working at KPMG Australia, that reveals a very different reality to that which Mr Yates was spruiking here in the Senate. I've taken great care to verify via documentation the authenticity of the matters I'm putting on record here in the Senate of the Australian parliament tonight.

In the words of the whistleblower:

On 30 May 2024, I provided information to an eligible recipient within KPMG Australia for the purpose of invoking the statutory whistleblower provisions under the Corporations Act. The information disclosed concerned matters that I had reasonable grounds to suspect constituted misconduct or an improper state of affairs or circumstances in relation to a regulated entity.

The concerns I intended to raise related to audit independence, misuse of confidential information, tender integrity failures, misleading of Parliament, examination misconduct and governance failures at the senior leadership level.

Prior to, and following the written disclosure, aspects of these matters had been raised verbally with senior leadership and Partners within KPMG Australia.

After invoking the whistleblower framework:

The whistleblower goes on to detail their efforts to escalate their disclosure—which includes KPMG executives, KPMG International, including its global chairman and global general counsel, and eventually ASIC—before making this disclosure to me, a parliamentarian, in the public interest.

The whistleblower goes on to detail the allegations of serious misconduct within KPMG Australia's audit and tender processes, and how the whistleblower's efforts to raise concerns about those issues was suppressed by governance failures that they believe extend into KPMG's international network. In the whistleblower's words again:

The matters concern audit independence failures, misuse of confidential client information, corruption of ASX audit tender processes, knowingly misleading a Senate inquiry, generative AI exam cheating following prior remediation claims, a pre-disclosure pattern of retaliation corroborated by a senior KPMG partner, retaliation against a protected whistleblower following formal disclosure, use of a deed of release as a suppression instrument, controlled and conflicted investigative processes, and international governance refusal to intervene.

These matters concern audits and tenders involving ASX-listed and systematically important institutions. If audit independence is compromised or ethical walls are breached, the reliability of decision-making by audit committees is undermined. The credibility of the audit function relied upon by regulators, investors and the public is also undermined.

I will now detail some of the allegations the whistleblower revealed in the documents that I sighted:

'Misappropriation or theft of Lendlease board papers'

Confidential Lendlease board papers were taken and circulated internally within KPMG and used to support pursuit of major audit tenders, including Westpac and Dexus.

These documents were taken from Lendlease by the lead partners on the account, Eileen Hoggett and Paul Rogers, and were physically secured in Ms Hoggett's locker.

Michael Ullmer, then Chair of Lendlease, and presiding over the Westpac audit selection process, was not informed that the tender process had been compromised by misuse of Lendlease confidential materials.

'Telstra IT Environment—improper access and use in tender context'

KPMG personnel offered access to restricted documents from Telstra's IT environment via a Telstra-issued laptop. These documents related to Telstra's AI governance policies and internal practices during a live external audit tender. KPMG was not authorised to access or deploy those materials in support of a live ASX audit tender.

'Macquarie Tender'

Serious concerns regarding independence and integrity arose during the pursuit of the Macquarie audit contract.

Michelle Hinchliffe, former head of Audit of KPMG UK, and previously a senior partner at KPMG Australia where she led the audit of ANZ bank, was centrally involved in the Macquarie audit tender process.

Serious concerns regarding independence and integrity arose during the pursuit of the Macquarie audit contract.

'Westpac Tender'

The Westpac audit tender was structurally compromised by the concentration of former KPMG partners in key Westpac decision-making roles.

Throughout the tender, KPMG received feedback and position intelligence not available to competitors. This included that the tender was KPMG's to lose, commentary undermining EY's proposed lead partner, guidance to reduce KPMG's fee by approximately 25 percent, and advice on managing perception optics.

'Independence Breach and Procurement Corruption in the Dexus Audit Tender'

While acting as Internal Auditor to Dexus, KPMG positions itself to bid for the External Audit, creating a clear independence risk requiring strict ethical separate under APES 110 and Dexus' own auditor selection policies.

On 6 November 2023, a meeting was held at KPMG's Barangaroo office … during that meeting, and despite acknowledged independence sensitivities, an arrangement was proposed where (one of the people present) would leave his laptop open with Dexus internal audit documents visible while he went for lunch, allowing external audit personnel to view them.

Senators, there are clear allegations here of profoundly unprofessional and unethical behaviour. One presumes they are exactly the sorts of concerns that Mr Yates would technically have wanted to be aired under his speak-up culture. But what appears to be the reality for this whistleblower is that the speak-up culture that Mr Andrew Yates and KPMG told our committee inquiry about in September 2023 did not actually exist. Each of the allegations I've put before the Senate tonight are supported, as I said, by documentation.

It is of great concern to me that someone who did have this evidence and professional integrity did try, through the processes available to them, to bring these concerns to the attention of KPMG and for there to be action internally. Let me be crystal clear: the whistleblower raised their concerns. The whistleblower escalated it to relevant executives. The whistleblower contacted KPMG's independent directors and even raise concerns with KPMG's internal chair and Global Council. In parallel, in a situation all too familiar to whistleblowers in these secretive partnership providers of audit and assurance, in Australia and across the globe, this person found themselves on the outer at work, removed from regular duties. And they eventually found themselves headed out the door as part of a highly convoluted HR process that seemed to commence around the same time as they started raising their concerns about the behaviour they had witnessed. What's the result of this? It's no surprise that the whistleblower no longer works at KPMG.

I know that on 7 November last year the Financial Review reported:

KPMG Australia is on track to become the dominant auditor of the country's largest listed companies…

Senators and members heard through our inquiries into the consultant audit sector that these massive partnerships had put profit before professionalism and used their privileged access to both business and government to grow their own wealth.

Why does it all matter? Well, I'll leave the last words tonight to the actual whistleblower:

If tender processes are compromised, competing firms are disadvantaged and audit committee decisions are distorted.

If ethical walls are breached, confidential audit information is misused and independent safeguards become performative rather than substantive.

If evidence given to Senate inquiries is inaccurate or incomplete, parliamentary oversight is undermined.

If statutory whistleblower protections can be neutralised through deed pressure, controlled reviews and privileged shielding, and evidence deletion, the regime fails in practice.

Is this really the best the public can expect from the new so-called leader of the pack? KPMG well knows about these allegations. I say to the partners, almost 700 at KPMG, very many who are honest, ethical, intelligent, professional people, what will you now do to address the matters that I have raised here tonight? What will you now do to reverse the deceptions perpetrated on Lendlease, Westpac, Dexus and Telstra? When will Mr Yates apologise once again to the Senate?

I remind you that Mr Yates said people need to be confident that, if they put their hand up, someone's going to investigate it. I can give my assurance I will continue to speak up here, in the Senate, in the interest of decent Australians who actually need the audit and assurance sector to operate with dignity and professional propriety.