KPMG’s Australian arm has been ditched by the country’s government for audit work until September, following the fallout of allegations that the firm mishandled client information, in the latest nightmare for the Big Four firm down under.

The Big Four giant will be unable to bid for any Australian government contracts until September 2026, as the country’s Department of Finance investigates the firm’s governance and ethical standards. 

In an announcement, the government department said it “will commission an independent review of KPMG’s governance, culture, ethics and integrity frameworks” arising from the “ ethical concerns” of the allegations. 

KPMG has agreed to temporarily cease entering into new contracts with the Australian government until 30 September. 

The scandal was prompted by a whistleblower who alleged confidential information had been inappropriately shared within the senior leadership team to win audit contracts, including with the chief executive. 

The allegations prompted an internal investigation, which did not substantiate the claims, and an external law firm also supported the outcome.

However, the whistleblower raised further complaints with the board, and an external law firm, Allens, was subsequently appointed to complete another investigation, which is still ongoing. 

This follows the resignation of the firm’s chief executive, Andrew Yates, and the national managing partner of audit and assurance, Julian McPherson, with immediate effect at the end of May.

Yates and McPherson both stepped down after KPMG admitted to severely mishandling its whistleblower report on client confidentiality breaches. 

The Australian arm, which employs nearly 9,000 people and has almost 700 partners, said in a statement in response to the government that it “will fully co-operate” with the Department of Finance’s investigation. 

“We acknowledge that individuals in our firm have made mistakes. But those failings do not reflect the overwhelming majority of our partners and people,” KPMG Australia said. 

It added: “We know we have work to do to regain trust. That work is already underway. We will engage constructively and cooperatively with the independent reviewer, listen carefully to feedback from our clients, regulators, stakeholders and our people, and take the actions needed to strengthen our culture, governance and ways of working.” 

Clients dropping like flies 

The Big Four firm has lost one of its biggest clients, Australian property developer Lendlease, which said it will drop KMPG as a client, ending a 68-year relationship which reportedly brought in about AUD $10m (£5.2m) in fees for the firm. 

In an announcement to the Australian Securities Exchange (ASX), Lendlease said its board has decided to change its auditor after the end of the 2026 financial year. 

The company said it “anticipates an orderly handover following the selection of a new auditor” and is “targeting a transition” through the 2027 financial year to appoint a new auditor for the beginning of the 2028 financial year. 

According to the whistleblower allegations, the Australian property company’s confidential board papers were used without permission to help win bids for audit work from the large bank Westpac and the property company Dexus.  

Westpac is also considering revoking its audit contract with KPMG, according to the Australian Financial Review. 

Reserve Bank of Australia governor Michele Bullock said in a Senate committee hearing at the beginning of June that the bank expects not to renew its contracts with KPMG. 

Audit body ‘deeply disappointed’

Top partners and auditors at KPMG Australia, Eileen Hoggett and Paul Rogers, were named in parliament in March as having allegedly shared Lendlease’s confidential information with other KPMG employees without the knowledge of Lendlease’s chair. 

More recently, the Australian Securities and Investments Commission said during a Senate committee hearing on 5 June, it had opened a formal investigation into KPMG and issued multiple compulsory notices to the firm. 

Chartered Accountants Australia and New Zealand (CA ANZ) said in an announcement on 11 June that it was “deeply disappointed” by the “serious allegations” against KPMG Australia and is reviewing the firm’s conduct. 

CA ANZ, a body that represents over 140,000 auditors and accountants in Australia, New Zealand, and overseas, said it is “actively investigating” the allegations, as they potentially breach its terms of contract. 

KPMG Australia in the headlines for AI misuse 

The firm also made headlines in February after a KPMG Australia partner was fined $10,000 (£7,200) for using AI to cheat on an internal training course designed to test knowledge of the technology. 

The Big Four giant’s Australian arm forced an unnamed audit partner to redo the test after the partner uploaded training materials to an AI platform to help answer questions. 

Big Four competitor Deloitte Australia also faced backlash over how it used its own AI, issuing a partial refund to the Australian federal government after it sent a report containing several AI-related errors. 

How does this compare with the PwC scandal?

KPMG Australia reportedly leaked the documents around the same time as its main competitor, PwC, faced similar allegations and was banned from working for the Australian government for leaking confidential client tax information. 

PwC has been involved in a number of scandals across the globe in the last few years as it fights to fix its reputation, with the Australian arm’s scandal at the heart. 

As a result, the firm was forced to sell its government consulting business for just A$1, over 300 jobs were cut, and senior staff, including chief executive Tom Seymour, resigned, which prompted a national inquiry.