KPMG embroiled in global scandal over alleged misuse of client data

KPMG is the latest major accounting firm to be embroiled in a global scandal, this time stemming from its Australian operations. The firm stands accused of using information obtained from client audits, which it knew was off-limits, to secure new business. This alleged subterfuge and misuse of confidential information for personal gain has cast a shadow over the "Big Four" accounting giants.

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KPMG is the latest to be at the centre of a global scandal emanating from its Australian operations.

The scandal echoes a similar incident three years ago involving PwC, which leaked secret government tax avoidance plans to multinational clients while advising the Australian Treasury. In the current case, evidence suggests KPMG not only knew about the misconduct but also actively tried to suppress the scandal, even after a whistleblower reportedly alerted them.

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It is accused of using information obtained in audits of its clients that it knew was off limits to win new business.

This latest controversy brings to mind the downfall of Arthur Andersen, once the world's largest accounting firm. It collapsed in 2000 after its role as auditor for the bankrupt US energy giant Enron, which was accused of hiding debts and shredding documents. Arthur Andersen also faced a substantial lawsuit for its poor audit work on the collapsed multinational Bond Corporation.

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KPMG, like many big firms before it, has dug itself an even deeper hole as evidence mounts that it ignored a whistleblower and actively sought to suppress the scandal.

In Australia, accounting firms, including EY, KPMG, and PwC, have faced intense scrutiny following the collapse of companies like Babcock & Brown, Allco Equity, and Centro during the global financial crisis. These firms were often criticized for misstating debts. While PwC was fined $60 million in 2018 for its handling of the collapsed Storm Financial, penalties for audit firms, even in egregious cases of unprofessional behavior, have historically been rare and lenient.

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Arthur Andersen was accused of hiding debts and later shredding documents to avoid the prosecution that ultimately led to the firm's collapse.