Australia’s financial watchdog announced Friday it has begun a formal investigation targeting three KPMG partners following whistleblower accusations that the accounting giant improperly accessed confidential client information to secure profitable audit deals.
The Australian Securities and Investments Commission revealed it started preliminary inquiries into KPMG in April before escalating to a full investigation following last week’s departure of the company’s chief executive and head of auditing.
“We have commenced our formal investigation earlier this week and I should also make clear that we have issued multiple compulsory notices throughout that period to KPMG,” ASIC Chair Sarah Court testified before a Senate committee Friday.
“There are three registered company auditors that are currently within the scope of what we were looking at, but I have to say this is an ever-moving feast at the moment as more information comes our way. So I don’t know that will be the end of it.”
KPMG representatives did not provide immediate comment when contacted.
The controversy began in March when Deborah O’Neill, a senator from Australia’s ruling Labor party, presented whistleblower accusations of wrongdoing at KPMG to parliament. The allegations included claims that private board documents from real estate firm Lendlease were inappropriately utilized to support proposals for significant audit contracts with Westpac, a major bank, and Dexus, a property company.
While KPMG completed an internal review of these accusations, the firm found no evidence of wrongdoing. The company has now hired law firm Allens to perform an independent external review.
Court expressed “deep concerns” regarding the alleged misconduct but noted that ASIC lacks authority to directly regulate the firm because of its partnership structure, limiting oversight to individual auditors only.
ASIC CEO Scott Gregson stated the regulatory agency has also requested guarantees from KPMG that no partners connected to the controversy are working on the regulator’s current contracts with the firm.
The Reserve Bank of Australia’s Governor Michele Bullock revealed Thursday that KPMG operated a whistleblower program for the central bank under a contract valued at A$10,000 ($7,121) annually.
“I don’t think we’ll be reappointing them to the whistleblower service,” she told a Senate committee hearing.
Bullock added that another KPMG contract for managing international employee recruitment would also be put out for new bids.
