The Importance of Independence in Whistleblower Investigations

In a recent column published in the Accounting Times, Nicole Wearne, Managing Partner of the law firm Kennedys, argues that the KPMG Australia scandal has exposed a fundamental problem in how companies handle whistleblower investigations, emphasizing that independence is essential. 

The KPMG case produced four investigations, two senior resignations, a federal parliamentary hearing, and a firm-wide apology, she recounts. Three successive investigations found the allegations unsubstantiated. A fourth, conducted by Allens with an expanded scope, is now challenging those conclusions. Wearne argues that the core problem is structural: appointing existing legal advisers to investigate whistleblower complaints creates conflicts that undermine credibility, regardless of the quality of the work itself.

“Perception of independence matters as much as actual independence,” she writes. Regulators heavily favor independent reviews, she notes, while whistleblowers may be hesitant to engage in processes perceived to be run by a company’s own lawyer. Scope is a related issue. In the KPMG matter, Wearne observes that the lack of early board oversight “allowed management to shape a process that should have been independent of it.”

“The credibility of an investigation,” Wearne concludes, “depends not only on what it finds, but on whether it was designed to find the truth.”