A former KPMG partner turned whistleblower has urged the federal government to consider a royal commission into the consulting industry and to formally ban firms that breach legal and ethical standards.
In late 2021 Brendan Lyon told a New South Wales parliamentary inquiry that he had been pressured to amend his work, which found the state’s budget was $10bn worse off than Treasury claimed.
He told the committee he believed senior partners at KPMG were conflicted because they had promised Treasury they could achieve a result that was not possible – a claim rejected by KPMG.
Lyon has now told a separate Senate inquiry into the federal government’s use of consultants that a more thorough, wide-ranging investigation of the industry would be beneficial.
“A royal commission into the role, regulation and performance of the accounting profession and major accounting firms would allow clear identification of problems within the profession and any risks that has created in the economy beyond,” Lyon said in a submission to the inquiry.
“Scandals in PwC and KPMG, combined with a sustained decline in audit quality by the major accounting firms, suggest that professional standards are falling because self-regulation is failing.”
Lyon’s submission was made public after the committee delivered its report, which found PwC engaged in a “calculated” breach of trust by using confidential information to help its clients avoid tax and engaged in a “deliberate cover-up” over many years.
The report found some PwC partners “had no regard for their obligation to maintain the confidentiality of Treasury consultations”, accusing them of “aggressively” monetising the information with “no regard for the public interest”.
This week PwC Australia named and removed eight senior staff from its partner ranks, including the former chief executive Tom Seymour, although he is not accused of misusing government information.
Lyon called on the federal government to “implement a default five-year ban on big four accounting firms found in serious breach of professional ethics by the new commonwealth regulator”.
Some departments have been reluctant to give PwC new contracts until multiple investigations are completed. So far, the Department of Health and Aged Gare is the only agency to confirm it has suspended a contract.
Lyon, who left KPMG in 2021, also called for a ban on political donations from major consultancy firms as outlined by the Centre for Public Integrity, the Greens and some independent MPs.
“In respect of its own procurement and management of consultants, the commonwealth should implement similar restrictions and obligations on public sector consultants to those binding public servants,” Lyon said.
In 2021 Lyon claimed he was pressured to amend his work on the NSW government’s Transport Asset Holding Entity. While KMPG disputed many of Lyon’s assertions, arguing they contained factual inaccuracies and misleading information, it acknowledged mistakes were made on the TAHE contract.
“KPMG used what was a difficult experience for many people at our firm as an opportunity to improve the way we work,” a KPMG submission to the Senate inquiry said.
“KPMG has apologised for the role it played in contributing to the complexities associated with TAHE and has undertaken remedial steps to address what occurred.”
In 2021 KPMG Australia was also fined US$450,000 (A$615,000) by the US audit watchdog over “widespread” cheating on online training tests designed to improve professional safety requirements and ensure partners and staff act with integrity.
Chartered Accountants Australia and New Zealand, which represents about 135,000 members including many who work at the big four consultancy firms, rejected Lyon’s claims it provided weak regulatory oversight.
“Dedicated self-regulation and co-regulatory enforcement of professional standards, by the profession’s own association, is consistent with the principle that the profession itself is most invested in preserving its reputation and value,” the group’s submission said.
The federal government has not indicated a royal commission is necessary and there are already multiple investigations into the scandal at PwC and the consulting industry.
