ANZ ends 6-decade KPMG audit partnership

In an announcement to the ASX, ANZ said KPMG will cease to provide its external audit service, ending a 57-year relationship.

The board of ANZ Group said it will commence a competitive tender process to select the next provider of its external audit services. ANZ’s audit is worth around $24 million annually, according to the Australian Financial Review.

ANZ underscored that KPMG will not be eligible to participate in the tender process given its long tenure.

Both the group lead audit engagement partner and the engagement quality control review partner have been regularly rotated during this six-decade relationship with KPMG, according to the lender.

However, it added that a tenure of this length with the big four accounting firm “is no longer considered appropriate and has been under consideration by the board for some time”.

The bank said it intends to conclude the competitive tender process by the end of April 2027, with the new external audit services firm expected to commence in the 2029 financial year.

“The board considered this timing of the tender process to be appropriate given the significant transformation agenda under way and the planned integration of Suncorp Bank,” ANZ said in its statement.

KPMG declined to comment on this development.

The tenure of external audit service providers has been under scrutiny in the recent past.

A Treasury options paper on the regulation of accounting, auditing, and consulting firm in Australia suggested mandatory audit firm rotation and limiting the period of time an audit firm could be appointed as auditor of a reporting entity, after which it would be required to appoint a different audit firm. The period would be set at 20 years, the paper said.

It also proposed that both existing and new reporting entities would be required to publicly tender for audit services every 10 years. It said new reporting entities would first be required to do this when they become a reporting entity.

ANZ has joined a list of other companies that have abandoned scandal-ridden KPMG as its external auditor in the recent past.

Insurance Australia Group recently dropped its $11.6 million partnership with KPMG and announced that it plans to run its external audit tender process in FY27 to address audit tenure. It had engaged KPMG as its auditor since listing on the ASX in 2000.

Macquarie Bank withdrew its recommendation to engage KPMG as auditor in August in a $95 million audit contract. It instead retained PwC after KPMG failed to meet the bank’s criteria.

The bank said it held concerns around KPMG’s audit practice in two key criteria, including capacity to deliver the audit given several members of the audit team have departed, and culture, “including a culture that transparently discloses issues”.

The loss of audit contracts for KPMG has followed the airing of “serious concerns” of alleged misconduct at KPMG by Senator Deborah O’Neill. This included breaches of independence, tender integrity failures, and the misuse of confidential information, following a whistleblower tip-off. There were further allegations of the mistreatment of the whistleblower.

The scandal resulted in the departure of several executives, including KPMG Australia CEO Andrew Yates (who was replaced by John Sams), and former chairman Martin Sheppard.

Other executives to depart the firm included former national managing partner of audit and assurance, Julian McPherson, and audit partners Kim Lawry and Paul Rogers. Lawry departed the big four accounting firm after Westpac demanded that she be removed from its file.

Former chief operating officer Eileen Hoggett was expelled from the partnership after Allens discovered new evidence in its investigation into alleged audit misconduct. Hoggett subsequently initiated legal proceedings in the Supreme Court of NSW.

On top of this, KPMG general counsel Louise Capon and head of HR Dorothy Hisgrove also stepped down from their respective roles.

KPMG undertook large-scale redundancy proceedings in August amid the audit scandal, with reports stating that it intended to lay off dozens of partners and around 1,000 staff in September.

At a recent appearance before the parliamentary joint committee, ASIC reported that it is reviewing over 550 internal complaints received by the big four accounting firms relating to alleged misconduct since commencing surveillance from 1 July 2023.

ASIC chair Sarah Court also told the committee that ASIC has directly received 139 reports of alleged misconduct relating to the big four accounting firms since 1 July 2023, and this may include services outside of audit functions.