KPMG Australia was fighting a crisis of confidence in its own professional conduct when a confrontation with one of the country’s largest private credit managers erupted into public view.
The audit firm was facing regulatory investigations, leadership departures and intense scrutiny over the misuse of confidential client information. Its governance arrangements were being overhauled, and its leadership was promising to rebuild trust.
At the same time, KPMG’s auditors were challenging asset valuations at Metrics Credit Partners, a private credit manager overseeing approximately A$40 billion in investments.
The disagreement delayed audited financial statements, contributed to the suspension of trading in three listed funds and prompted restrictions on withdrawals from underlying wholesale funds. Metrics eventually accepted substantial valuation adjustments before KPMG issued unmodified audit opinions.
The two events were unfolding within the same firm, during the same period.
That raises an intriguing question: Could KPMG Australia’s own reputational crisis have made its auditors particularly cautious about accepting Metrics’ valuations?
There is no public evidence establishing that connection. The valuation dispute had substantive accounting issues of its own, and auditors have a professional obligation to challenge management’s assumptions when the evidence warrants it.
But the timing invites consideration of a broader question about audit firms: can a crisis of professional credibility make an audit firm more exacting in its audits?
A confrontation over valuations
The first clear public signs of the audit dispute emerged on 28 September 2026, when Metrics disclosed that the previously published preliminary financial statements of three ASX-listed funds could differ materially from their final audited accounts.
The funds were the Metrics Master Income Trust (MXT), Metrics Income Opportunities Trust (MOT) and Metrics Real Estate Multi-Strategy Fund (MRE).
Their preliminary financial statements were published on 31 August, but Metrics warned that the final audited figures could differ materially.
Over the following weeks, disagreements about asset valuations became apparent.
KPMG’s audit work identified differences between certain valuations and the firm’s own calculations, including assessments of distressed assets.
The issues involved assumptions about equity investments, commercial property exposures and provisions for expected credit losses.
For a private credit manager, these valuations are inherently judgmental. Unlike listed securities, privately originated loans and equity positions often lack observable market prices. Their reported values can depend on expected cash flows, collateral values, recovery prospects and assumptions about future economic conditions.
Different assessments of those factors can produce materially different valuations without necessarily demonstrating that one party has acted improperly.
In the Metrics case, the disagreement had unusually visible consequences.
The final audited accounts, published on 2 October, confirmed substantial reductions in the valuations previously reported by Metrics, following revisions first disclosed on 28 September. Across the three listed funds, the accounts recorded combined reductions of approximately A$185.5 million in investment fair values compared with the preliminary accounts. The adjustments varied across the three funds, with the largest percentage reductions affecting the income opportunities and real estate funds.
KPMG did not complete the audits by the 30 September deadline. Trading in the listed funds was suspended, while redemptions from major underlying wholesale funds were also halted.
KPMG ultimately issued unmodified audit opinions on the revised financial statements.
Metrics had accepted the revised valuations, although its management emphasised that the adjustments were unrealised rather than losses crystallised through asset disposals.
The episode did not end with publication of the accounts. Metrics subsequently announced plans to review its governance arrangements and consider possible compensation for investors who had transacted at valuations later revised.
Meanwhile, a crisis inside KPMG
The Metrics disagreement was unfolding against an extraordinary backdrop for KPMG Australia.
In March 2026, allegations concerning the handling of confidential audit-client information became the subject of parliamentary scrutiny. The controversy developed into a wider examination of professional conduct, whistleblower treatment, governance and accountability within the firm.
In a statement issued on 29 May, KPMG acknowledged shortcomings in its treatment of a whistleblower and the investigations into the allegations. It also confirmed inappropriate handling of confidential client information, including a separately identified incident involving internal sharing of client documents.
The firm said it would explain to audit clients why the conduct matters did not compromise the quality of their audits. It also committed to strengthening confidentiality controls and inviting external scrutiny of its remediation efforts.
On 23 June, KPMG announced leadership changes and a governance overhaul, including plans for independent board oversight, changes to senior leadership and strengthened controls.
Significantly, the action plan included measures relating specifically to audit quality, ethical standards and the firm’s system of quality management.
The repercussions extended beyond internal governance. In August, Macquarie Group abandoned a proposed appointment of KPMG as its auditor. Other major clients subsequently reconsidered longstanding audit relationships, although some attributed their decisions to auditor tenure rather than the scandal.
KPMG was therefore facing not merely a reputational problem but a challenge to the confidence of the clients, regulators and investors who depend on its professional judgments.
It was in this environment that the Metrics audit reached its most difficult stage.
The shadow of PwC’s Evergrande scandal
KPMG Australia’s own difficulties were not the only reminder of the consequences of an audit firm’s loss of credibility.
Two years earlier, PwC’s audit of Chinese property developer Evergrande had resulted in one of the most severe regulatory sanctions imposed on a Big Four audit firm. In September 2024, Chinese regulators imposed penalties totalling RMB441 million (approximately US$62 million) on PwC’s mainland audit firm, including a six-month suspension of business activities.
PwC acknowledged that its audit work had fallen substantially below the standards expected of its firms. The consequences included leadership changes, the departure of audit personnel and the loss of clients.
The parallels with Metrics should not be overstated. Evergrande involved serious regulatory findings concerning PwC’s audit work, whereas KPMG’s dispute with Metrics concerned valuations that were subsequently revised before the auditor issued unmodified opinions.
Nevertheless, Evergrande had demonstrated the potential consequences of failing to exercise sufficient professional scepticism when auditing financially exposed businesses.
For KPMG Australia, already dealing with a crisis of its own, could the experience of another Big Four firm have reinforced the incentive to be particularly cautious about difficult accounting judgments?
There is no evidence that the Evergrande case directly influenced KPMG’s handling of Metrics. But it formed part of a wider industry environment in which the commercial, regulatory and reputational consequences of audit failures had become increasingly visible.
Could the scandal have sharpened professional scepticism?
An auditor’s professional scepticism should be driven by the audit evidence, not by the fortunes of the firm employing them.
In practice, however, auditors operate within institutions. Those institutions establish risk-management procedures, review requirements, consultation arrangements and expectations about when difficult judgments must be escalated.
Their appetite for reputational risk may change when the organisation itself is under scrutiny.
A firm confronting allegations of professional misconduct might become particularly reluctant to accept judgments that could subsequently be challenged. Its leadership may be more sensitive to the consequences of an audit failure, while engagement teams may feel greater pressure to demonstrate that they have exercised appropriate scepticism.
Could something similar have happened at KPMG Australia?
It is a plausible question, particularly given the firm’s public commitments to strengthen governance, controls and professional accountability during the very period in which the Metrics dispute intensified.
KPMG’s June action plan included strengthening its system of quality management, amending audit-pursuit policies and increasing independent oversight of audit quality and professional ethics. Those measures demonstrate an institutional response to the scandal, but they do not establish that KPMG changed its audit procedures or judgments on the Metrics engagement.
Could KPMG Australia’s wider difficulties have influenced the level of scrutiny, internal consultation or willingness to challenge Metrics’ valuations? Were the firm’s reviewers particularly conscious of the consequences of another controversy involving professional judgment?
The case for an ordinary audit disagreement
There are strong reasons to believe the Metrics dispute could have unfolded in much the same way without KPMG’s wider problems.
Australia’s private credit market was already attracting regulatory scrutiny, particularly concerning the valuation of illiquid assets and the treatment of distressed loans.
The collapse of Sydney property developer Bathla, which had borrowed heavily from private lenders, had intensified concerns about property-related credit exposures.
Regulators were questioning whether fund valuations adequately reflected deteriorating economic conditions and the risk of losses.
KPMG’s objections therefore arose in a sector where valuation assumptions were already under pressure.
The eventual adjustments also suggest that the dispute concerned substantive financial reporting judgments rather than simply disagreements about documentation or procedure.
Metrics co-founder Andrew Lockhart acknowledged during an October investor webinar that the audit process had exposed challenges for the firm’s governance and valuation arrangements. He said Metrics respected the auditor’s position, even while expressing disappointment about the adjustments.
When an audit firm has something to prove
The conventional concern about audit quality is that commercial incentives can weaken an auditor’s willingness to challenge a client.
Audit firms compete for engagements, maintain longstanding commercial relationships and operate under pressure to complete work efficiently. Those incentives can conflict with the demands of professional scepticism.
The Metrics case raises the possibility of a different dynamic.
What happens when an audit firm’s reputational incentives point in the opposite direction?
Could a firm facing scrutiny over its professional conduct become less willing to compromise on difficult audit judgments? Might its leadership become more concerned about the risk of signing questionable financial statements than about the commercial consequences of delaying an audit?
And could an institutional crisis, at least temporarily, reinforce the very professional scepticism that audit regulation seeks to protect?
None of these questions establishes that KPMG’s confidentiality scandal caused it to take a tougher position on Metrics.
The evidence does establish that KPMG challenged valuations, Metrics revised its accounts, and the auditor ultimately issued unmodified opinions. It also establishes that these events occurred during a period of exceptional pressure on KPMG Australia’s leadership, governance and professional reputation.
Whether the two developments were connected remains unknown.
But the coincidence offers a useful perspective on the institutional forces surrounding audit judgments. Reputational pressures are often discussed as threats to audit quality. In some circumstances, they might also strengthen an audit firm’s determination to challenge its clients.
The Metrics dispute raises the possibility that, when an audit firm has its own credibility to rebuild, professional scepticism may become an institutional priority as well as a professional obligation.
This article is part of the Big4News Investigations & Analysis series, which examines the structural forces shaping Deloitte, PwC, EY and KPMG.
Check out our continuing coverage of the KPMG Australia Audit Leak Scandal.
KPMG Australia Audit Leaks Scandal
The KPMG Australia audit-leaks scandal, which erupted publicly in March 2026, has developed from a whistleblower’s contested allegations into an established pattern of misconduct, investigative failure and governance weakness. It represents one of the most serious integrity crises to hit the Big Four in Australia since the PwC tax leaks affair.
About Claudine Cassar
I’m a corporate anthropologist and former Deloitte equity partner. I sold my technology business to Deloitte in 2016 and led the Malta Consulting team for five years. I am the founder and editor of Big4News, which provides independent, clear analysis of PwC, Deloitte, EY, and KPMG — free from corporate spin.
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