This week: A senator uses parliamentary privilege to raise allegations that KPMG internally leaked confidential client information to win work. The firm says it has investigated the matter and denies wrongdoing, which, as defences go, has a familiar ring. Elsewhere, big four reforms stall, FTI goes shopping at Deloitte, PwC and EY, and we roll our eyes as Bain thinks up “the agent factory”.
In this week’s issue:
Parliament investigates KPMG (client) leaks allegations
Labor senator Deborah O’Neill raised the KPMG allegations in the Senate. Dominic Lorrimer
A little after 9pm on Tuesday, March 24, Labor senator Deborah O’Neill got up in the Senate to make a 10-minute speech.
Its content was extraordinary. Quoting an unnamed former KPMG Australia executive, O’Neill accused the firm of repeatedly misusing confidential client information to win work.
The claims, raised under parliamentary privilege, alleged the firm misused board papers from client Lendlease to win external audit work for Westpac and Dexus. Inside information was also allegedly used to win external audit contracts for Macquarie Group and Westpac.
She told parliament she had “taken great care to verify, via documentation, the authenticity of the matters I am putting on record here in the Senate of the Australian Parliament tonight”, but did not provide details of this evidence.
O’Neill said the firm failed to act on the unnamed whistleblower’s detailed May 2024 complaint, which also included claims about AI-related exam cheating.
KPMG denied wrongdoing when asked about the claims last Wednesday (March 25). The firm said the claims had been both repeatedly investigated and “included new and unsubstantiated allegations”.
The firm also said the complainant had failed on 20 occasions to provide further evidence to back up the allegations.
Last Thursday (March 26), the powerful parliamentary committee chaired by O’Neill held a private meeting with the whistleblower. The joint committee on corporations and financial services is now assessing the evidence and has invited other parties to come forward.
The move raises the possibility that KPMG Australia partners and staff may be called to testify before parliament.
Troubling timeline
KPMG has said its investigation remains open, as does the offer for the whistleblower to provide evidence. The firm would not say if it would hand over the results of its internal investigations and its two external legal investigations to the committee.
It refused to provide details about which allegations it had investigated or if it offered the whistleblower legal protections.
I’ve been told by a source not authorised to speak about internal firm matters that the firm has asked at least some individuals related to the allegations to stop talking to the whistleblower.
It all adds up to a serious – and growing – problem for the firm.
Rear Window opined that KPMG Australia chief executive Andrew Yates could use the claims as an “opportunity to learn” how to walk the talk on ethical standards.
The matter recalls the PwC tax leaks episode, which blew up into a scandal partly because it was never investigated properly in the first place.
Stalled whistleblower protections
The allegations highlight that whistleblower protection laws urgently need to be overhauled.
That’s the view of Kieran Pender, the associate legal director of the Human Rights Law Centre.
Pender, a veteran of helping whistleblowers navigate legal issues, says the government is obliged, under the Corporations Act, to review whistleblower protections but has yet to even issue a consultation paper.
As mentioned, a particular issue in the KPMG case is the lack of clarity about whether whistleblowers at the big four partnerships are covered by existing laws.
“Whistleblower protections urgently need to be reformed,” Pender says.
“Some Australian whistleblowers cannot raise concerns safely because they don’t have strong legal protections due to gaps in private sector whistleblower laws.
“Those gaps are particularly acute in the accounting, auditing and consulting sector, as Treasury identified in its 2024 consultation. Whoever they work for, Australian whistleblowers should be able to speak up about wrongdoing safely, lawfully and without fear of reprisal.”
Stalled big four reforms
On the issue of stalled reforms, Treasury has now been sitting on the results of its consultation into auditing and consulting governance for almost two years.
The consultation, which closed in mid-2024, was triggered by the PwC tax leaks scandal and followed a parliamentary inquiry that made 40 recommendations to reform the sector. Details of the 36 submissions and 16 private forums are contained in a ministerial summary, released under freedom of information laws.
Treasury was told the big four accounting firms Deloitte, EY, KPMG and PwC operate in a regulatory grey area with gaps in how the partnerships are policed, and the current oversight of audit quality is inadequate.
Of note is that there was general agreement among the dozens of submissions that partnerships should fall under existing corporate whistleblower protections.
Professional moves
The latest professional services promotions, moves and profiles.
Steve Dyson is a new senior managing director at FTI Consulting. He is part of a new mining advisory team at the firm. Dan Peled
FTI Consulting has poached senior mining experts from three of the big four consulting firms to anchor its new mining advisory division.
The team comprises former Deloitte Australia global mining operations lead Steve Dyson, former PwC Australia global mining and metals lead Franz Wentzel, and former EY Australia global mining productivity lead James Chapman.
The group aims to recruit two more partners and about 20 staff, Brisbane-based Dyson says.
“So probably by the end of year one, we ideally want to be around about 20 people, maybe 25 people. And then by year four, we probably want to be about 50, 60 people,” he says.
“We expect to get bigger than that, but we’re not looking to become another big four or [a] behemoth in the space. We’re looking to make sure we’re doing the real top end of town, really complex programs of work where you need the expertise and senior people to influence the outcomes.”
Dyson says the team will help clients reduce costs and improve profitability.
“We want to be in and around some of those larger [mining] deals which are happening, but primarily focused around getting the operations efficient, getting the operating model a bit more leaner, so they can have a bit more sustainability and profit.”
Their ideal client is one that can handle the truth.
“I think the one-line pitch to the clients is that we are completely independent in terms of what we’re looking at, and we’re going to give you our honest opinion, not necessarily the opinion and viewpoint that you or your board might want to hear,” Dyson says. “So it’s certainly going to be a new perspective, fairly hard hitting from our side.”
In other moves:
Latest stories
Consulting clients: Accenture, PwC, McKinsey
AI and the professions
How generative AI is shaping professional services.
Tim Doyle, co-founder and CEO of Eucalyptus, says regulation needs to meet citizens where they are online. Oscar Colman
On Monday afternoon, I moderated a punchy panel at The Australian Financial Review Healthcare Summit with an all-star panel of experts, including Quantium Health chief executive Brian Hartzer, Monash University DNA Screen co-lead Jane Tiller, Eucalyptus co-founder and chief executive Tim Doyle and CSIRO Australian e-Health Research Centre research director David Hansen.
Doyle said artificial intelligence is making it much easier to expand quickly overseas, potentially positioning Australia as a hub for successful healthcare start-ups like Eucalyptus, which was sold to New York-listed obesity drug giant Hims & Hers Health for $1.6 billion.
Pending regulatory approval, Doyle’s new global role will involve entering new markets. Eucalyptus currently uses two AI tools: Lorikeet for customer service agents and Amigo AI to support customers using the diet medicines.
While the high cost of Lorikeet means the company is only “marginally ahead two years in”, Doyle expects savings to accelerate alongside customer growth.
“We have customer support agents in Australia, Manila and South Africa. We’ve probably been able to 2x the patient base, so incrementally 100,000 patients, without growing the size of that team,” Doyle said after the panel. “Also, the AI token cost is going down so fast that it will really scale.”
During the panel, Tiller told the crowd she is lobbying the federal government to fund broader DNA testing of high-risk diseases, while Hansen explained the importance of data standards to ensure health software systems can talk to each other.
Hartzer said AI has proven to be really good at “crunching lots of data and recognising patterns and serving them up to a clinician to make a judgment.”
#REF!
A regular look at the words and phrases professionals love to use, and what they’re really saying.
The agent factory
Use: “Scaling AI across the enterprise demands more than upgrading data science teams or bolting AI onto existing IT capabilities. It requires what we call an agent factory – a repeatable, industrial process for building, testing, deploying, and governing AI agents.” From a Bain article titled “The AI Enterprise: Code Red”.
Meaning: A process to create AI agents.
What it probably means: A process to create AI agents.
The alternative: This uses unnecessary terms (industrial, repeatable, factory) to make software development sound more appealing to non-techy executives. It also assumes everyone knows that an AI agent is a piece of software designed to carry out tasks with minimal supervision. In the end, “the agent factory” is really referring to a form of software development. “The AI agent development process” is more accurate, but not as fancy-sounding.
We hope you enjoyed this edition of Professional Life – sign up for free here to get it direct to your inbox every Wednesday before it appears online.
Cheers,
Ed.
Connect: edmundtadros@afr.com.au and LinkedIn.
Find out the inside scoop about Accenture, Deloitte, EY, KPMG, PwC and McKinsey. Sign up to our weekly Professional Life newsletter.