Australia's corporate watchdog is facing intense scrutiny after it awarded active taxpayer-funded contracts to KPMG, after it had already launched an investigation into three of the firm's partners.
The stunning conflict-of-interest defence was laid bare during a tense senate estimates hearing, where Australian Securities and Investments Commission (ASIC) officials confirmed they held eight active contracts with the embattled consultancy firm valued at $3 million.
The revelation comes as the Department of Finance weighs a dramatic whole-of-government response to the escalating crisis, including a potential total suspension from the Commonwealth's management advisory panel.
The crisis erupted in March 2026 after whistleblower allegations surfaced that KPMG partners illicitly accessed confidential Lendlease board papers to gain an unfair advantage when pitching for lucrative Westpac and Dexus audit contracts.
Although KPMG's initial internal review failed to substantiate any wrongdoing, the firm has since abandoned those findings and has now hired independent law firm Allens to conduct a comprehensive, external inquiry.
A Canberra Times analysis of AusTender data showed that in the 2025-26 financial year, KPMG won federal contracts worth a total of about $203 million.
The firm holds 294 active distinct contracts scattered across 67 different departments and agencies, with a total combined value of about $585 million.
Of those, there are 33 active auditing contracts that have an associated value of about $27 million.
ASIC chief executive Scott Gregson said of the eight active contracts with KPMG, six were for services and two were for consultancy.
In a tense hearing, Greens senator Barbara Pocock grilled officials over why ASIC's own procurement arm appeared entirely blind to the regulatory arm's investigations.
Mr Gregson defended the agency and said procurement operated independently from its live enforcement files.
"So you have no problem doing business with people you are investigating, you have no procedure?" Senator Pocock said.
"It is appropriate we do have separation on some of that information," Mr Gregson said.
"I don't think that passes any kind of public test, frankly," Senator Pocock said. "That is a real concern."
Under questioning from Senator Pocock regarding the exact correspondence and timeline of events, ASIC chair Sarah Court said that the move to a formal investigation followed an intensified period of proactive engagement.
ASIC held an initial meeting with KPMG on April 14 before beginning an investigation, and subsequently launched a preliminary investigation on April 21 to review the information.
On April 29, ASIC received information from KPMG stating that a number of people were being investigated by the company itself, including three registered company auditors that it was proposing to sanction. This culminated in what Ms Court referred to as a flurry of activity when the chief executive and head of audit resigned.
Despite holding deep concerns over the firm's behaviour, Ms Court said there was a significant gap in Australia's regulatory framework.
The watchdog is strictly limited to dealing with individual registered auditors, leaving it unable to discipline or penalise the corporate firm as a single entity, which was further complicated by KPMG's partnership structure.
The fallout continues to spread rapidly across the public sector.
Beyond ASIC's internal procurement conflict, the Reserve Bank of Australia announced it would retender its whistleblower hotline contract, and multiple other government agencies confirmed they were actively re-evaluating their exposure to the embattled firm.
Large corporate clients, including Lendlease, have also placed their relationships under review.
For now, individual departments and agencies are waiting on a centralised, whole-of-government response from the Department of Finance before taking definitive action on their own active contracts.
Finance deputy secretary Marisa Purvis-Smith confirmed that the department was weighing a range of strict repercussions for KPMG in light of the integrity breach.
Potential measures included placing the firm under intensive oversight, negotiating a mutual agreement to temporarily bar KPMG from bidding on Commonwealth contracts or suspending the firm entirely from the government's management advisory services panel.
