‘Toxic culture’: KPMG whistleblower airs major grievances with firm’s audit division

The whistleblower who reported the audit misconduct at KPMG has exposed the bullying, poor culture, and working conditions that allegedly existed within KPMG's audit division in a series of emails.

Editor's note: This story first appeared on HR Leader's sister brand, Accounting Times.

The whistleblower who reported the audit misconduct at KPMG has exposed the bullying, poor culture, and working conditions that allegedly existed within KPMG's audit division in a series of emails.
The whistleblower responsible for bringing the misconduct matters at KPMG to light has shared some of the other concerning behaviours that allegedly occurred within KPMG's audit practice in a series of emails published as part of the inquiry into the big four firm.

The whistleblower's allegations were investigated by both KPMG and an external law firm and were found to be unsubstantiated by both KPMG and the external law firm.

In an email sent to the former national managing partner of assurance, Julian McPherson, the former KPMG employee alleged that a number of the partners at KPMG had engaged in bullying-type behaviour and had acted inappropriately.

Despite raising concerns about defamatory comments and poor conduct allegedly made by certain KPMG partners, the whistleblower was actively discouraged from pursuing them further.

"I have raised with you and a number of other partners the inappropriate and bullying behaviour of Kim Lawry, an audit partner and KPMG Board member. Indeed I have discussed with you personally the matter and we have discussed Kim's improper behaviour [and] conduct," the email read.

"It is clear to me that KPMG has a duty of care to take these concerns seriously and investigate properly, but when I have raised these issues I have very clearly been warned against progressing them."

The whistleblower suggested in the email that the firm had "protected" Lawry as she was a member of KPMG's board and was also the lead audit partner on the Westpac contract, a contract that was "commercially sensitive and important to KPMG".

One of the emails said that the alleged behaviour was well known and documented and that numerous KPMG partners had warned the whistleblower of her propensity to retaliate and of examples where she had behaved similarly in the past.

Within the same email, the whistleblower also raised significant concerns regarding the ethics, integrity and culture of KPMG's audit practice.

"I work with multiple partners identifying and pursuing new business opportunities and I work with multiple partners on the commercial operations of our business, ie setting of fees, negotiations and process improvements. Through this I have seen a number of actions taken by individuals that are quite clearly not up to the ethical standards of KPMG or the expectations of regulators, governments or the public at large," they said in the email.

"These are not isolated incidents but instead endemic within the organisation whereby profit and revenue growth is placed above everything else including integrity, people, wellbeing and fundamentally doing the right thing. Some of these incidents involving current KPMG partners and ex-KPMG partners I have personally witnessed, others I have seen evidence of and have led to significant commercial outcomes for KPMG, but raise serious questions about what lengths the business is prepared to go to achieve growth and profit."

The former KPMG employee said that when they questioned some of these unethical practices, they were faced with "marginalisation and retaliation" for simply acting with integrity and raising genuine concerns about conduct, ethics and integrity.

"The lack of speak up culture, the culture of fear, retribution and revenue growth at all costs is not acceptable. Whilst I regret the role that I have played in this to date, I have learnt that personal prospects, promotion and income should not warrant turning a blind eye and not speaking up louder, sooner," the whistleblower said in the email.

"I can no longer stand by and watch this happen and absolutely feel that I have done the right thing when raising some of these concerns. It is KPMG's toxic culture and its thirst for improved partner remuneration at all costs that has resulted in them not being listened to or acted upon.

"It appears to me that certain Partners at KPMG and some retired partners have forgotten that ultimately they serve the public interest and those of shareholders, and they have not conducted themselves properly when involved in large ASX listed audits contracts."

During one of the inquiry hearings, McPherson said that following the whistleblower complaint he had gone immediately to HR.

Senator Deborah O’Neill criticised McPherson for not giving priority to the whistleblower’s allegations, and suggested that it had been treated as a “HR problem”.

Lawry left the firm earlier this month after Westpac demanded she be removed from her roles in the audit misconduct being investigated at the firm. This followed McPherson's resignation from his role as national managing partner of audit and assurance in May.

This also follows a series of other prominent departures from the firm, including former chief executive Andrew Yates and KPMG chair Martin Sheppard.

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