The boss of KPMG Australia has resigned after the firm admitted to severely mishandling a whistleblower report on client confidentiality breaches.

The scandal was prompted by a whistleblower who alleged that client documents were inappropriately shared with the senior leadership team, including the chief executive, which prompted an internal investigation.

But the investigation did not substantiate the claims, and an external law firm also supported the outcome.

However, after the whistleblower raised further complaints with the board, a different external law firm, Allens, was appointed to complete another investigation into the claims, which is ongoing.

On Friday, the firm released a statment confirming its treatment of the whistleblower and the probe “fell short” of the firm’s expectations.

As a result, chief executive Andrew Yates and the national managing partner of audit and assurance, Julian McPherson, have resigned effective immediately.

In his statement, Yates said: “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.”

McPherson added: “Matters have arisen for which I am responsible, and I take accountability.”

The findings have been shared with impacted clients, professional bodies, regulators, and the Parliamentary Joint Committee.

The board appointed Stan Stavros as interim chief executive of KPMG Australia while continuing its process to appoint a permanent successor to Yates.

Chair apologised ‘unreservedly to the whistleblower’

Chairman Martin Sheppard issued a lengthy apology saying they ‘apologise unreservedly’.

“KPMG apologises to the clients whose information was not handled with the care and respect they expect from us. We also apologise to our people, as these matters do not reflect on the contribution they make to KPMG and our clients,” said Sheppard.

He added that KPMG would also engage an ethics consultant to review its “speak-up culture” and has promised to publish the findings.

The Big Four giant is now contacting affected clients, reinforcing data controls, and reviewing audit clients to ensure these conduct issues did not impact audit quality.

“We acknowledge we have work to do to rebuild trust. 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,” Sheppard added.

The firm was in the headlines in February after a KPMG Australia partner was fined $10,000 for using AI to cheat in an internal training course meant to test knowledge of the technology.