Macquarie gives Hinchliffe clean chit after KPMG meetings

The Macquarie Group and bank boards announced to the market that they had completed a review of Macquarie’s 2025 audit tender process with big four accounting firm KPMG Australia as well as the conduct of Macquarie’s non-executive directors Michelle Hinchliffe and Susan Lloyd-Hurwitz.

The boards sought independent advice on these matters from former chief justice of the Supreme Court of NSW Tom Bathurst, it said.

Hinchliffe’s conduct was under scrutiny after it was revealed that she made contact with key KPMG personnel three times while the accounting firm was bidding for Macquarie’s $75 million audit contract.

Hinchliffe – who was a partner at KPMG for 37 years up to February 2022 in the UK and Australia – joined Macquarie a month after departing the large accounting firm.

In responses to questions taken on notice during the KPMG ethics and accountability parliamentary hearing, Macquarie revealed that Hinchliffe said she recalls meeting KPMG pitch team personnel three times during that period.

Furthermore, it said Hinchliffe had contact with KPMG pitch team members through her attendance at presentations to Macquarie management and to the Macquarie board during the Macquarie audit tender period.

Macquarie noted that she recused herself from any scoring of the firms and from the decision to appoint KPMG.

Lloyd-Hurwitz sent an email to a KPMG partner during the audit tender process asking for a meeting in relation to general careers advice for one of her children, which Macquarie said did not materialise. She made similar requests to other companies from a range of industries around the same time.

No breaches of duties found

In Macquarie’s latest audit tender review, Bathurst concluded that neither Hinchliffe nor Lloyd-Hurwitz breached their fiduciary or statutory duties or Macquarie’s policies or rules.

This is despite Macquarie Group chairman Glenn Stevens telling the Parliamentary Joint Committee on Corporations and Financial Services’ KPMG ethics and accountability public hearing that there were protocols around how senior personnel conducted themselves during an audit tender process.

Stevens told Greens senator Barbara Pocock that he had not questioned Hinchliffe about any contact she had with senior KPMG figures during the audit tender process.

Bathurst also concluded in the review that any conflicts from Hinchliffe’s interactions with KPMG staff before and during the audit tender process were “managed appropriately”. He said Hinchliffe did not give KPMG any unfair advantage over other firms in the process through her interactions or through any information provided.

“Having considered the review findings, the Boards remain fully supportive of Ms Hinchliffe and Ms Lloyd-Hurwitz. They each make key contributions and their respective skills are highly valuable to the Boards’ effectiveness,” Macquarie said in its statement.

Comms emphasise culture issues

Furthermore, the review – which was led by board governance and compliance committee chair Rebecca McGrath – considered an Allens report on KPMG e-comms as well as documents shared with Macquarie by KPMG which sought to identify any misuse of Macquarie or third-party confidential information in relation to the audit tender or any other breach of the audit tender process rules.

It said the e-comms raised additional questions around KPMG’s use of Macquarie’s confidential information beyond the agreed protocols of the audit tender process. This, Macquarie said, highlighted cultural issues cited by Macquarie in August this year as one of the reasons for no longer recommending KPMG as its preferred auditor.

The Macquarie board withdrew its recommendation to engage KPMG as auditor in August after the scandal-ridden firm failed to meet the bank’s criteria.

Nevertheless, while the review found no breach of duties, policies, or audit tender rules, Macquarie said its tender rules will be reviewed for any future audit tender process, including in relation to restrictions on personal contact with participating audit firms during the tender period.

The board’s conflict of interest policy will also be externally reviewed as part of its “usual annual refresh”, Macquarie said, to identify potential improvements as best practice evolves.

“While the review found no breach of duties, policies or audit tender rules, the boards recognise that auditor independence, conflicts management, and governance standards are of significant interest to shareholders and other stakeholders,” Macquarie said.

“The boards acknowledge the importance of considering both actual and perceived conflicts and are committed to strengthening Macquarie’s approach wherever improvements can be made.”

‘Most Australians would be horrified’: Pocock

Pocock said in a statement to Accounting Times that culture is set at the top and it’s critical for conflicts of interest to be disclosed and managed effectively.

“Using personal relationships to gain access during a lucrative tender gives an unfair advantage and raises a serious conflict of interest. Most Australians would be horrified by this, but Macquarie has somehow declared everything is fine,” she said.

Accounting Times requested comments from Macquarie, but it did not respond by the time of publication.

KPMG Australia has been embroiled in controversy since Senator Deborah O’Neill raised serious concerns about alleged misconduct at the large firm, including breaches of independence, misuse of confidential information, and tender integrity failures, after a whistleblower made the allegations.

The allegations were made by a former KPMG employee to O’Neill after multiple attempts to escalate the matter with KPMG senior staff and ASIC, O’Neill said in the Senate in March. The allegations concern major KPMG clients including Macquarie, Westpac, and Lendlease.

Since then, there have been multiple senior resignations, investigations, and parliamentary hearings.

A recent review by Chartered Accountants Australia and New Zealand (CA ANZ) found no deficiencies within KPMG’s systems and processes despite the firm being investigated on allegations of serious audit misconduct.