KPMG’s recent audit leak crisis has exposed a familiar corporate playbook when it comes to crisis response strategy: engage external lawyers to investigate, then claim legal professional privilege to shield the findings from scrutiny.
It is a strategy frequently adopted in high-stakes workplace investigations. But recent developments suggest its limits may be more significant than many organisations assume.
How the audit leak saga unfolded
In 2024 a KPMG whistleblower raised concerns with KPMG senior executives that confidential client information had been misused internally to help win audit work. KPMG says it conducted an initial internal investigation which found the allegations were unsubstantiated. An external investigation by Ashurst was said by KPMG to have supported those findings. KPMG then engaged Allens in 2025 to conduct a further review which ultimately found some of the claims to be substantiated. That review by Allens has since led to the current crisis in KPMG, culminating in last Friday’s parliamentary inquiry.
In the lead up to last week’s inquiry the parliamentary committee requested KPMG produce documents related to its investigations into the audit leaks. It refused to comply, claiming legal professional privilege over the requested documents.
Recent judicial guidance
We don’t have to look too far back to get an understanding of how courts have applied the common law principle of legal professional privilege. In fact, at the same time the KPMG audit leak crisis was playing out in the public sphere, McCafferty J was considering these issues in the matter of Smith (a pseudonym) v. Gilchrist Connell Pty Ltd (a firm) [2026] QSC 122 for which judgment was delivered on 11 June 2026.
In Smith, the plaintiff pursued a personal injury claim in relation to an incident in 2021 when her daughter swallowed a button battery while in the care of a C & K Kindergarten. The plaintiff sought disclosure of various investigation documents from Gilchrist Connell who, not only acted on behalf of C & K in defence of the personal injury claim, but had earlier been engaged by C & K to investigate the incident and respond to a request for information from Workplace Health and Safety Queensland and the Department of Education. Gilchrist Connell resisted disclosing the requested documents on the basis of legal professional privilege. The relevant issue to determine a valid claim for legal professional privilege is whether the creation of the document was for the dominant purpose of giving or obtaining legal advice for existing or anticipated proceedings. This necessarily involves an assessment of the purpose of the document, which must be the dominant purpose. To this end, His Honour gave this guidance:
“The dominant purpose, which must be determined objectively having regard to the evidence, is one which is the ruling, prevailing, or most influential purpose. It is one that predominates over other purposes, that is, one that is of greater importance than any other. The concept of a dominant purpose is not the same as the primary or substantial purpose.
Where two purposes are of equal weight, neither is dominant. As such, privilege will not attach to where obtaining legal advice was one purpose for creating a document but another purpose was equally important, or where the document would have been created irrespective of any intention to obtain legal advice or use it in anticipated litigation.” [1]
The scope of any retainer or investigation will be directly relevant to assessing the “dominant purpose” of a document in the circumstances. In Smith, McCafferty J concluded that Gilchrist Connell were engaged to conduct an investigation in response to the Department of Education’s request for an investigation and report. In those circumstances, legal professional privilege did not attach to many of the investigation documents including audio recordings, photographs, witness statements and emails.
What this means for KPMG
Returning to the KPMG saga, reporting by the Australian Financial Review suggest Ashurst was engaged to simply review KPMG’s internal investigation and advise on employment law issues.[2] That is, they were seemingly engaged for a dual purpose. If that was the case, there may very well have been force in the argument that legal advice was not the “dominant purpose” required for privilege to attach to validly withhold disclosure.
Perhaps the writing was on the wall for KPMG regarding the strength of its position to resist handing over these documents. It didn’t take long after Friday’s parliamentary grilling for KPMG to concede their position and hand them over. KPMG’s experience is a reminder that legal professional privilege is not a blanket shield for workplace investigations.
[1] [2026] QSC 122, 23-24
[2] https://www.afr.com/companies/professional-services/inside-the-law-firm-probes-that-let-kpmg-cloak-itself-in-secrecy-20260621-p608ok .
