In February 2020, KPMG Australia commenced an investigation examining potential misconduct by some of our people in relation to internal Independence Training and associated testing.
We quickly identified the improper sharing of answers to the test associated with the 2019/20 Independence Training and called out the behaviour in firmwide communications to all partners and staff in February and March 2020. Demonstrating how seriously we take the matter, we self-reported the issue to regulators and launched an investigation. We then immediately commenced implementation of a remediation plan.
Our partners and people were required to complete a new test in relation to the Independence Training in early March 2020. During 2020, KPMG Australia also implemented additional education programs focused on the importance of training, issued clearer and more prominent warnings about training and testing-related misconduct, and introduced enhanced monitoring to identify possible future misconduct. The firm also released internal integrity training which highlighted, amongst other things, that sharing answers in relation to testing is not acceptable.
Today we are sharing the details of the investigation with our people. We confirmed the Public Company Accounting Oversight Board (PCAOB) had censured the firm; had imposed a US$450,000 civil penalty on the firm; and will require KPMG Australia to undertake certain remedial actions.
KPMG Australia CEO, Andrew Yates said: “While we moved quickly to get on the front foot with our response to this matter almost 18 months ago, it is important today to come full circle and be transparent and reinforce to our partners and people that this behaviour is totally unacceptable. It represented not only a breach of our Code of Conduct, but clearly does not align with our values.”
“I’m disappointed because the conduct reflects on all of us. Everyone at our firm is now absolutely clear that there are non-negotiable expectations of behaviour aligned with our values. Our partners and people understand that unethical behaviour has no place in the values-based culture at KPMG.”
“The behaviour struck at the heart of our culture and that’s why it was crucial we acted quickly and decisively. It is also why we need to learn from this experience. We believe the PCAOB recognised how seriously we treated this issue from day one and could see we had stepped up and taken ownership of our response,” he added.
In making its determination against KPMG Australia, the PCAOB acknowledged the firm’s “extraordinary cooperation”. It specifically noted that the firm had voluntarily self-reported the matter shortly after learning about the misconduct; had provided substantial assistance to the PCAOB’s investigation; and promptly instituted remedial measures and imposed sanctions.
KPMG Australia took disciplinary action against 1,131 people in relation to testing-related misconduct, including verbal or written cautions and written warnings being communicated to the majority of individuals who were involved. KPMG confirmed warnings plus remuneration consequences on 46 people, including 16 partners; and 2 partners departed the firm as a result of the investigation.
“Looking forward, we will place greater emphasis on building, measuring and managing our culture – embedding behavioural expectations into scorecards to drive accountability. Having a values-based performance conversation will be an important part of developing our people, and identifying potential for leadership roles,” Andrew Yates added.