The corporate regulator has been told by the big four accounting firms — KPMG, PwC, EY and Deloitte — that there have been 551 complaints about alleged audit misconduct.
In the wake of whistleblower revelations that confidential board papers from Lendlease were used to support bids for major audit tenders for Westpac and Dexus, the Australian Securities and Investments Commission (ASIC) is investigating the big four and asking them about internal whistleblower complaints.
The watchdog told a federal parliamentary hearing in Sydney today that it was looking at whistleblower complaints to the big four accounting firms dating from July 1, 2023.
ASIC's executive director of enforcement and compliance, Chris Savundra, told the hearing that, so far, 551 complaints had been made.
ASIC chair Sarah Court then clarified that "just to be clear … this includes whether the firms have received complaints relating to misconduct by registered company auditors, such as the misuse or sharing of confidential information".
"So that's what we have asked for," she said.
"And then we have used our compulsory information gathering powers in relation to obtaining that material."
She said the regulator was looking at "each of these complaints and ascertaining whether there is more work for ASIC to do in relation to investigations or enforcement action or activity in relation to particular issues".
"I don't want to suggest that there's, you know, 550 serious whistleblower issues," she said.
"We don't know and there's a lot of work for us, clearly, to be looking through those complaints, getting more information as we need it."
Senator Barbara Pocock asked if that 551 figure was "spread evenly across the four firms, 125-odd or over 100 in each of the four?"
Ms Court then suggested that the hearing go off-camera so ASIC could give the committee looking into the audit leaks scandal further information.
Senator questions whether KPMG 'turned over a new leaf'
Senator Pocock has also called on ASIC to broaden the period in which it investigates whistleblower complaints within the big four, noting that only going back over a three-year period does not capture historical complaints.
KPMG has argued that certain documents relating to the audit leaks scandal should not be released publicly because they are the subject of legal professional privilege.
Senator Pocock told the hearing that the KPMG leadership had consistently argued they had "turned over a new leaf" and alluded to the firm needing to be transparent.
"This committee has spent hours listening to the leadership of KPMG, [CEO John] Mr Sams and [chairman Michael] Obeid telling us that they've turned over a new leaf, that they are a new leadership, 'there is new culture, trust us', and yet here we are," Senator Pocock said.
"There is a clear message, certainly for me, that they'll be back talking to us again if they don't deliver what they say they're doing culturally."
In December 2021, another KPMG whistleblower wrote to ASIC about separate claims that the firm may have breached the corporations law.
In an email to ASIC in June, the whistleblower detailed how ASIC rejected their earlier attempt at making a disclosure, and it was their view that the regulator had to be "dragged kicking and screaming" to investigate alleged misconduct at KPMG.
ASIC began its investigation this year only after the allegations of the audit leaks whistleblower were aired by Senator Deborah O'Neill under parliamentary privilege.
While the federal government reviews laws protecting whistleblowers, Senator Pocock asked ASIC whether whistleblowers needed interim measures that might make them more willing to make disclosures about alleged misconduct.
Ms Court said she would have to reflect on that, but there needs to be "urgent clarity" about whether disclosures made to ASIC by whistleblowers are protected.
Did KPMG make 'false or misleading' statements?
ASIC also told Friday's hearing in a submission it was investigating documents KPMG had lodged with the regulator to determine if they contained false or misleading statements.
"Initial inquiries are focused on the basis for statements made in that report, including the statement that there were no whistleblower complaints related to audit quality."
Aside from commencing "surveillance of the Big Four accounting firms, to examine internal complaints received by those firms about their audit practices", ASIC was also now "conducting an assessment of the corporate entities in the KPMG corporate group to identify any director conduct that may require further regulatory consideration".
Ms Court has told previous hearings that the regulator was limited in investigating partnerships but on Friday said: "We are looking carefully at the various KPMG-related corporate entities because, as you say, the Corporations Act obligations would then apply in relation to those corporations."
Earlier in Friday's hearing, ASIC announced it was investigating whether superannuation trustee Diversa inappropriately charged fees to victims of the First Guardian collapse. Diversa ran the platforms that allowed thousands of investors to pump money into First Guardian.
ASIC has previously said about $300 million was invested into First Guardian from 2020 to 2024 through superannuation funds for which Diversa was trustee. The regulator is suing Diversa over alleged due diligence failures, but Diversa is fighting the legal action.
