KPMG COO steps down as audit leak scandal deepens

KPMG Australia has been forced into another major leadership reshuffle as the fallout from a widening audit leak scandal continues to grow, according to multiple sources.

Chief operating officer Eileen Hoggett has stepped aside from her executive role while multiple investigations examine allegations that confidential client information was misused to help secure lucrative audit contracts.

The move follows the resignations last week of chief executive Andrew Yates and head of audit Julian McPherson, adding further pressure on the Big Four accounting firm.

As reported by ABC and Reuters, Hoggett will remain an audit partner while the investigations continue.

Whistleblower allegations

The controversy centres on allegations first raised by a whistleblower in May 2024.

The claims were initially dismissed by KPMG. However, they gained national attention after Labor Senator Deborah O'Neill disclosed them under parliamentary privilege earlier this year.

Among the allegations is that confidential board papers from property giant Lendlease were improperly accessed and used to support KPMG's bids for major audit contracts at Westpac and Dexus.

Speaking in parliament, Senator O'Neill alleged, “Documents were taken from Lendlease by the (KPMG) lead partners on the account, Eileen Hoggett and Paul Rogers, and were physically secured in Ms Hoggett's locker.”

Lendlease has publicly confirmed that KPMG misused its documents. The company has since announced it will put its external audit contract out to tender next year after decades of working with the firm.

It is also understood that SingTel Optus was informed by KPMG that its data had been accessed during efforts to win audit work from Telstra. Macquarie Group was also named during parliamentary proceedings.

Interim CEO appointed

KPMG has appointed Stan Stavros as interim chief executive while a permanent replacement is sought.

In an email to staff, Stavros acknowledged the firm's handling of the matter had fallen short.

"Taking on the role of Interim CEO comes in circumstances neither I, nor any of you, would have liked. I come to this role not having been involved in the whistleblower process, but it is clear to me that we should have handled things differently. I am 100% committed and will ensure we approach the issues in the right way,” said Stavros.

 He also warned staff that scrutiny of the firm was far from over.

“I want to be open that we should all expect the heightened public scrutiny to continue for some time."

He added, “My focus is on placing the business in the best position possible in this environment — both navigating the serious whistleblower-related issues but importantly remaining focused on the market and serving our clients. We must support our people and deliver on our priorities. I will be speaking with you further on this shortly."

Government scrutiny

The controversy is now attracting attention from regulators and governments.

The Australian Securities and Investments Commission (ASIC) has launched a preliminary investigation into the conduct of three registered KPMG auditors.

A parliamentary hearing examining the allegations is scheduled for 19 June.

Meanwhile, New South Wales Finance Minister Courtney Houssos has sought assurances from KPMG regarding the management of confidential information and whether any staff under investigation are currently involved in government contracts.

"In light of the serious concerns which have been raised about KPMG's work practices, the government is seeking assurances about the management of confidential information and whether any personnel under investigation are currently working on NSW government contracts," Houssos said.

"The information KPMG provides will inform any further action the government may take. We will also continue to monitor developments in other jurisdictions and will not hesitate to act to protect the interests of the people of NSW."

"We are committed to upholding the highest standard among our suppliers."

According to Reuters, NSW Treasury Secretary Michael Coutts-Trotter has also requested details of KPMG's active state government contracts and sought explanations on how the firm intends to address the ethical concerns raised by the allegations.

The Victorian government is reportedly reviewing its own contracts with KPMG to ensure confidential information has not been misused.

Trust under pressure

The scandal is raising fresh questions about trust, governance and ethics within Australia's professional services sector.

KPMG recently admitted that its treatment of the whistleblower and its initial investigations were not conducted with the "necessary rigour" and had "fell short of the firm's expectations".

An internal investigation and a subsequent review by an external law firm failed to substantiate the allegations. However, after the whistleblower escalated concerns directly to board members, KPMG engaged law firm Allens to conduct a fresh investigation.

That review reportedly challenged earlier findings and uncovered an additional incident involving the inappropriate sharing of client documents.

KPMG chairman Martin Sheppard has apologised to both the whistleblower and the firm's clients.

"We acknowledge we have work to do to rebuild trust," Mr Sheppard said.

He also said the firm had "committed 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".

The firm has additionally appointed Principia Advisory to review its internal speak-up culture and reporting processes.