KPMG chair Alison Kitchen tells lenders: ‘Own up to mistakes’

Corporate Australia needs to ‘get ahead of the whistleblowers’, KPMG’s chairwoman says.

Alison Kitchen, KPMG’s chairwoman. Picture: Aaron Francis.

The new chairman of big four ­accounting and consulting firm KPMG and one of the nation’s top auditors has urged corporate Australia to “get ahead of the whistleblowers” and be prepared to publicly own up to mistakes and bad behaviour to help bridge the widening trust deficit with the community.

Alison Kitchen, KPMG’s leading audit partner who is the first woman to be appointed to the chairwoman role at any big four firm in Australia, said the public was “sick of spin, false promises and people not owning their mistakes and doing something about them” in the business community.

“Business needs to be more prepared to call out bad behaviour. And when they see it in other companies and they are investigating to see they haven’t got it themselves, they need to be more open and on the front foot in saying it is unacceptable in that other business, that they have checked their own and they haven’t got it,’’ she told The Australian in her first wide-ranging media interview since taking up the role on September 1.

“Get ahead of the whistleblowers and start to actually take some of the positive ownership of things that are happening. And be prepared to tell people that you have … checked and sometimes that you have had to get your own house in order and do something about it. That, I think, would rebuild trust.’’

Embarrassing revelations by whistleblowers of scandals at the likes of Retail Food Group, 7-Eleven, Commonwealth Bank, Domino’s, Caltex and Aveo have hit the share prices of the listed companies and led to investigations by regulators and the resignations of some CEOs and key executives.

The scandals within Commonwealth Bank and other parts of the banking industry recently prompted the federal government to cave in to pressure from the Nationals and the Labor opposition to call a royal commission into the sector.

Ms Kitchen declined to ­comment on the looming royal commission, to be headed by judge Kenneth Hayne, saying KPMG had several ­different ­clients already ­wrestling with different ­issues raised by the ­inquiry.

It has been reported that all the big four accounting and consulting firms have been quietly helping bank executives decide how to navigate any issues that might emerge in the inquiry, including changes the banks might need to make to their business models.

But Ms Kitchen did reveal she would be retaining her role as lead partner on the external audit for ANZ, despite being appointed KPMG chairwoman.

She was one year into her ­rotation at the bank when elected to her new role by KPMG’s partners last year. “I could not walk away from them one year into my reign,” she said.

She also said maintaining her ANZ role would help make her a better chairwoman at KPMG.

“If you are an audit partner on a bank, you have a constant reminder of what is happening in the broader business community. As a client partner, it makes me better able to be a chair,’’ she said.

Ms Kitchen said she would need to spend 40 per cent of her time on the bank audit.

“Over the course of the year it comes in peaks and troughs. And that is perfectly OK. It is a first for KPMG but most of the other firms don’t have a full-time chair as well as a full-time CEO,’’ she said.

Ms Kitchen, who has worked at KPMG for almost 24 years, also said she was appointing KPMG’s first external board member.

She has already appointed two non partners to the board, which was previously made up of nine members who were all partners.

The firm’s partnership agreement allows it to appoint up to three members to the board in ways other than through partner elections.

“I saw through my election process to the chairmanship role that the power in the partnership lives with the lifers. The new people in the firm feel they aren’t known or recognised enough,’’ she said.

Ms Kitchen took fierce issue with recent assertions by the departing boss of the corporate regulator, Greg Medcraft, about the quality of corporate audits in ­Australia. Mr Medcraft said they were appalling, getting worse and could lead to an Enron-style corporate collapse.

Ms Kitchen said: “One of the things I worry about is that it is the role of the regulator and the audit profession to provide confidence in capital markets and those statements make that challenging.’’

Ms Kitchen said KPMG and the broader accounting industry had good relations with the Australian Securities & Investments Commission.

“We are massively invested in continuous improvement, new technology, ongoing training, and are all about making things better and more robust. We stand by the quality of our audits,’’ she said.

“We are not perfect and we know that. We are open and respectful with ASIC and from time to time they make findings and we work with them on those.”

In September, shortly after Ms Kitchen took on her role and just before her first global board meeting, KPMG cleared out its South African leadership after damning findings from an internal investigation into work done for businessmen friends of President Jacob Zuma, including the Gupta group. KPMG said its audits of the Gupta group “fell well short of the quality expected”.

Ms Kitchen said the firm’s response to the crisis should set an example for other corporations.

“We have been very transparent in taking ownership, apologising and being very open about the actions we have taken. And being prepared to accept whatever the findings were,” she said.

“We will do whatever it takes to restore our credibility in that market.’’