KPMG boss Andrew Yates: Scandal costs another big accounting CEO his job

The chief executive of KPMG, one of the biggest accounting firms, resigned on Friday over a whistleblower complaint the firm initially ruled was groundless.

Andrew Yates, a 36-year-veteran of the firm, will leave immediately, KPMG said, taking responsibility for executives who used clients’ confidential board papers to win business from competitors.

A KPMG executive in charge of auditing many of Australia’s largest companies, Julian McPherson, resigned too, and the corporate regulator said it had begun an investigation.

KPMG Chairman Martin Sheppard apologised “unreservedly” to the unnamed whistleblower, who raised concerns two years ago that KPMG staff had used confidential information from construction giant Lendlease to win work with other companies, including Westpac Bank and the Dexus property trust.

The 9000-employee firm faces the risk of losing government and corporate contracts that helped it generate revenue of $2.3 billion last year.

Apart from auditing accounts to check they are accurate and money is not missing, KPMG is part of an elite group of four financial services firms that provide tax and business advice to wealthy individuals, companies and government agencies and departments.

Competitor PwC was caught four years ago using confidential planned changes to the tax law to recruit and advise clients, a scandal that also cost the chief executive his job and millions in contracts.

“We acknowledge we have work to do to rebuild trust,” Mr Sheppard, the KPMG chairman, said in a press release. “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.”

In 2024 an internal investigation dismissed the complaint, which included the allegation a KPMG partner displayed Lendlease board papers in a meeting seeking an auditing contract with Westpac.

Auditors have access to highly sensitive client information they are expected to keep secret from other clients.

“The initial internal investigation, that did not substantiate the allegations raised by the whistleblower, was in hindsight not conducted with the necessary rigour required,” KPMG said Friday.

The whistleblower then provided more information, which prompted KPMG to hire a law firm to conduct an independent investigation. The law firm concluded there was no serious breach, although some partners were punished for minor mistakes.

Still not satisfied, the whistleblower approached members of the KPMG board, who hired a second law firm to investigate, leading to Friday’s resignations.

The board said it was unhappy with how the KPMG executives dealt with the whistleblower and the “rigour of the investigations”.

The second legal investigation recently uncovered another incident where documents containing client information were shared internally when they shouldn’t have been, KPMG said Friday.

“Our investigation into this matter is ongoing,” the firm said.

The allegations became public in March when a Labor senator, Deb O’Neill, read some of the whistleblower’s complaints in parliament.

The Australian Securities and Investments Commission on Friday said it had begun a preliminary investigation into some of the firm’s auditors, who have to be registered with ASIC to vet accounts of all but-the-smallest companies.

“We’ve identified that three of the four people involved are registered company auditors and . . . therefore come under ASIC’s regulatory oversight,” ASIC commissioner Kate O’Rourke told a parliamentary committee.

The federal Finance Department on Thursday raised the possibility KPMG could be blocked from bidding for government contracts, a dramatic step that could lead businesses to shun the firm too.

Mr Yates’ biography, which remained on the KPMG website Friday, said he was “committed to KPMG Australia being purpose-led and creating a culture based on energy, aspiration and inclusion”.

In the firm’s press release, he accepted responsibility for the breaches. “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,” he said.

Westpac declined to comment. Lendlease did not immediately respond to a request for comment.