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KPMG releases partnership agreement to Senate inquiry

Regulation

The document sets out rules regarding ethical conduct, confidentiality and “involuntary retirement”.

By Philip King 10 minute read

KPMG has gone it alone in releasing its partnership agreement following  requests by the Senate inquiry into consulting services this week that were rebuffed by EY and Deloitte as too commercially sensitive to make public.

The document, in response to questions on notice by Greens senator Barbara Pocock, redacts the list of partners “due to privacy concerns” but reveals KPMG’s policy on ethics, confidentiality and “involuntary retirement” of members.

Clause 23.1 says that the CEO can request involuntary retirement if:

“(a) the partner’s performance is not expected to meet the current or future strategic or performance objectives of the firm or KPMG International;

“(b) the partner is unwilling or unable to redress the areas where their performance, contribution or conduct has been assessed as urnsatisfactory; and/or

“(c) the partner has breached any of the rirm's or KPMG lnternational's values or policies in a way which is material and/or sustained.”

The KPMG document also allows for expulsion of a partner “who admits to having committed, or is found by a court of law of competent jurisdiction, or is

alleged by a prosecutor or regulator, to have committed fraud or acted dishonestly or unethically”.

In either case, the partner may still be entitled to a retirement payment if the national board decides in favour.

The tax scandal at PwC, which prompted the senate inquiry, resulted in a eight partners being forced out of the firm earlier this month but its partnership agreement remains secret at the request of the firm.

On confidentiality – a central issue in the PwC affair, where a partner used secret Treasury tax plans to the firm’s advantage – the KPMG agreement allows “disclosure of confidential information to another partner, the firm or its officers, employees, advisers or agents in each case to the extent required in the proper performance of the partner’s duties to the firm and for the purposes of the firm business”.

It also sets out a partner’s “legal, fiduciary and ethical” obligations to other partners and the firm.

These include an agreement “to comply with all applicable professional rules and standards governing the conduct of the professional services the firm provides in each of the places where the firm carries on its business” as well as not undertaking “any activity that is detrimental to, or could put at risk, the financial, property or reputational interests of the firm”.

The organisation of the Big 4 accounting firms came in for severe criticism during the inquiry this week from former KPMG partner Brendan Lyon who said their partnership structures allowed them to operate “beyond the law” under a preferential scheme that delivers “absolutely no regulation and almost nothing in terms of financial risk”.

Now at Wollongong university as professor of practice, Mr Lyon said the professional bodies had bastardised the partnership model by operating as “pseudo corporations” that paid no company or payroll tax, did not disclose executive or audited financial statements yet effectively “sit in every boardroom and cabinet across Australia”.

 

 

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Philip King

Philip King

AUTHOR

Philip King is editor of Accountants Daily and SMSF Adviser, the leading sources of news, insight, and educational content for professionals in the accounting and SMSF sectors.

Philip joined the titles in March 2022 and brings extensive experience from a variety of roles at The Australian national broadsheet daily, most recently as motoring editor. His background also takes in spells on diverse consumer and trade magazines.

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