HMAS Sydney has not been found. The crew of the Kormoran were able to give the location of the engagement and the last course of the Sydney. Witnesses saw the bridge completely obliterated, and all return gunfire gradually diminished to nothing. The ship was burning fiercly from bow to stern when the Sydney sailed off on a fixed bearing, so it is supposed to have had no crew in a condition to command the ship. Of course, it is not known how long the ship was able to continue on it's course, or the time or location of it's sinking. An extensive search of the area off the WA coast failed to find any clue to it's fate. The area has even been scoured by Dr Ballard of Titanic fame, but with such vague loctions, it's nearly an impossible task.
I do have doubts about the Jap Sub theory. All of the Germans were interviewed thoroughly, and although they may have had some time on liferafts to "Get their story straight",
many were captured in different boats and far removed from each other. Many gave slightly varying stories depending on their view from, or particular duty on the Kormoran, but all were consistant in the general gist of the Kormoran luring the Sydney in close and completely surprising her.
Although most Japanese Submarine crews did not survive the war, there are no Japanese naval records showing submarine operations in the Indian Ocean in Nov '41 (most were heading to Pearl Harbour), and no German or Japanese records of any Mothership/Sub co-operation between the axis navies. There is simply no military, naval or diplomatic archival material from the axis side to suggest that any Jap sub was in the area. While it may be in the Japanese interest to deny the actual sinking, the fact is there wasn't a single Jap sub in the whole Indian Ocean at the time.
This myth has grown on the basis of "We wuz robbed", the belief that the tricky Japs MUST have been involved to have outwitted such a fine ship as the Sydney. Although the Sydney is presumed to have sunk on 19 Nov, Aust authorities were not aware of the reason the Sydney was overdue until the first German survivors were picked up on 22 Nov. Full public censorship of news of the possible sinking was put in place until 1 Dec when the first sketchy news releases were allowed, with the final declaration that the Sydney was presumed sunk with all hands being made on 4 Dec. Of course, when news of the Japanese attacks on Pearl Harbour, Hong Kong and Malaya were announced on 8 Dec, the public thought "A-HA! That's what must have happened to the Sydney!". The
National Archives site has a good summary of the incident, by reading the chapters in the left column.