KPMG is losing million-dollar contracts, but hasn't hit the bottom yet

Predictable things are happening to embattled consulting firm KPMG.The bill is being paid for some of its poor choices.Some of its most senior leaders have been exposed in excruciating hearings before a parliamentary committee.Each hearing has been a drip-feed of painful new revelations, apologies for misleading facts given in previous hearings and the torment of watching people attempting to minimise and deflect what are clear and obvious bad calls.This hasn't happened because some rogue juniors cut a corner to try to seal a deal. These are the most senior executives, some earning more than $1 million per year, making appalling decisions.Here are just a few examples.The CEO Andrew Yates resigned after downplaying a whistleblower's complaints about KPMG staff misusing its clients' confidential information to win new contracts.The chair Martin Sheppard was pressured to step down as well.Though he probably didn't realise his day-long grilling by politicians was an exit interview until the committee held a press conference at the end of it, saying he needed to go.Five former KPMG partners were grilled in Canberra: Julian McPherson (left), Kim Lawry, Martin Sheppard, Andrew Yates and Eileen Hoggett. (ABC News: Matt Roberts)Parliament heard how senior partner Kim Lawry had a screenshot of a confidential Lendlease board paper — how they "score" the pitch for auditors — on her phone.About to hit 30 years with the firm, she couldn't recall if she took the screenshot, if she sent it, how it got there, or "that it was confidential at the time".Eileen Hoggett, who was in consideration to be the next CEO, previously denied a whistleblower's allegation about her that she'd kept sensitive Lendlease board documents in a locker.Then the committee obtained an email to Ms Hoggett's personal assistant, which contradicted her denial.In that message, she told her assistant to let another senior staff member quietly look at those confidential files:"He needs to do it sensitively without letting too many people know," Ms Hoggett wrote, ending the email with a "smiley" emoji.KPMG has faced months of scrutiny over its handling of a whistleblower complaint. (ABC)KPMG executive director and deputy general counsel James McClelland was on the verge of tears as he told a parliamentary hearing how KPMG had dealt with the whistleblower.Mr McClelland said there were failings on KPMG's part in regard to "taking action more quickly whenever wrongdoing was pointed out", "misleading answers to questions" and the truth "not [being] told in those interviews"It was emotional, searing stuff.But again, all too late. Mr McClelland had written letters to the whistleblower earlier so venomous the new chair Michael Ebeid (then a director) said later the "levels of aggression" made him feel "uncomfortable".Mr McClelland apologised to the whistleblower but defended himself as acting on instructions from the firm.It's very clear.These are serious people that you can no longer take seriously.More issues to come for KPMG and 'big four' firmsFor KPMG, there are problems in the past, the present and the future.Macquarie Group will drop KPMG as its auditor, in the fall-out of the ongoing scandal about its handling of confidential information and bigger questions about how it has won new contracts.That has led to staff cuts.But ironically, not in the audit division. That's because there are already concerns KPMG does not have enough staff to do the audits it is contracted to complete.Because of the complexity of Macquarie Group's operations, the contract to audit Macquarie is considered Australia's most valuable, worth between $700 million and $1 billion over 10 years.KPMG won the lucrative audit in 2025, but had not started the role. It will now remain with hardly-cleanskin-to-scandal PwC Australia, which held the contract for decades previously.In his testimony on August 14, chairman Glenn Stevens said there was still time for Macquarie to dump KPMG as auditor.Macquarie Group has announced KPMG will be dropped from an auditing contract amid ongoing scrutiny into the firm's auditing practice. (Reuters: David Gray)"We are expecting to receive information quite soon and we, as a board, need to either have confidence to proceed with the current plan to move ahead with KPMG [as auditor] or, you know, it's conceivable that we can revisit that decision," the former Reserve Bank governor said.Like that would have been a long meeting.One of the nation's most rapacious and aggressive financial institutions, publicly humiliated by a client that wants to be paid a billy to certify its ongoing fiscal rectitude?Come off it: booted.It's unlikely to be the last dumping. These kinds of contracts generally attract a "panel", where firms submit bids and they are assessed.What corporate governance officer is going to be signing off on a deal with KPMG while it is currently banned from pitching for new government work? When might more revelations come out? When it's cutting hundreds of staff and partners?There's more scrutiny ahead.The most recent parliamentary hearings ran so far over time ASIC didn't even get to appear. The corporate regulator has things it wants to say. This Friday, it'll finally get the chance.KPMG's new chief executive John Sams showed great contrition when Macquarie made the announcement, noting it was "a clear reminder that the consequences of our past failings are real"."Rebuilding trust will require sustained action, transparency and time. I am committed to leading this change with honesty, transparency and urgency," he said.Unfortunate then that the most memorable action of the new chair Michael Ebeid, so far, is to apologise for a scathing internal email that he wrote.In that email, he rubbished the whistleblower and accused senator Deborah O'Neill, chair of the parliamentary committee looking into KPMG, of lying to the Senate.What a great fresh start.For the other "big four" firms, none are crowing about their clean sheets.They are keeping their heads down, hoping that mooted legislation to increase scrutiny and transparency doesn't impact the huge profits they've been distributing to their battalions of highly paid partners.PwC shows there is no certaintyBut ignore the existential crises. Let's focus on the singular.In 2023, PwC Australia endured a scandal over the misuse of confidential information, that time about future plans to tax multinational companies.By the time it ended, PwC Australia was a shadow of itself, with around a quarter of staff hived off to a new company, Scyne Advisory, formed just to quarantine the ongoing government contracts.The funders bought it for $1 (and the immense debts of the superannuation and entitlements of the employees, weighed against the potential of the ongoing contracts and getting more of them). It is no longer a part of PwC Australia.Even last year the number of PwC Australia staff fell a further 5 per cent to 6,131, its partners down 8 per cent to 575, according to its most recent annual report.KPMG has longstanding contracts with the defence department, stretching for years. But what are its chances of picking up large volumes of work elsewhere in the shorter term?You'd have to think it's very poor.Dexus was one of the firms involved in the KPMG scandal — through no fault of its own — when confidential data from other companies was used in KPMG's successful bid for its audit contract.Chair Warwick Negus put it beautifully in his testimony, inadvertently summarising the whole KPMG debacle."We are disappointed by what we understand at the moment," he said."And that understanding continues to grow".It's likely to grow further on Friday, when the Parliamentary Joint Committee on Corporations and Financial Services holds its next public hearing in Sydney, as it continues to chisel away at the wrongdoing inside some of Australia's most powerful firms.