KPMG shows the big four rot is not just a few bad apples
Focusing on individual actions ignores the systemic architecture that makes such behaviour not just possible, but entirely rational.
Professor Stephen Taylor recently argued that the recurring scandals at KPMG and, by extension, the broader big four – Deloitte, PwC, EY, and KPMG – result from a syndrome among the firms’ partners he calls GSA, or greed, stupidity and arrogance.
While GSA is undoubtedly present, Taylor’s diagnosis is dangerously incomplete.
The scandals at KPMG reflect a culture that knows it’s too big to fail and too protected to care. Getty
By focusing on people behaving badly, he ignores the systemic architecture that makes such behaviour not just possible, but entirely rational.
The ongoing legal battle of former KPMG partner-turned-whistleblower Brendan Lyonreveals that the true crisis is one of structural accountability, where professional bodies and liability shields have created a class of protected partners who are immune to the consequences of their own advice.
Taylor suggests that artificial structural distinctions, like separating audit firms from consulting firms, will not address the GSA problem.
In fact, he maintains that even an audit-only firm could succumb to greed.
However, this perspective overlooks how the big four’s current integrated business model prioritises profit and partner return over ethical considerations.
“If a firm’s liability is capped, but its profit potential is not, greed is not a character flaw; it is a business strategy.”
What were once corporate watchdogs are now commercial juggernauts in which partners are incentivised to adopt a marketing mindset that prioritises lucrative consulting fees over technical excellence.
When 80 per cent of the $9.2 billion in 2025 revenue comes from category 3 non-accounting services, the audit function becomes little more than a loss-leader – a foot in the door for more profitable advisory work.
This is not merely a few bad apples behaving indecently; it is a systemic incentive structure designed to maximise partner wealth through institutional capture of public and private organisations.
The secretive partner shield
The most damning evidence against the individual behaviour argument is the secretive partner shield, which Lyon is currently challenging in the NSW Supreme Court.
Under today’s professional standards schemes, the big four’s liability is generally capped at about $1 million after insurance, regardless of the scale of the disaster they may have caused.
As Lyon argues, it is entirely rational for a partner to accept massive fees for risky tax advice or overstating asset values when the financial consequences for that partner are capped at some insignificant amount.
To put it bluntly, if a firm’s liability is capped but its profit potential is not, greed is not a character flaw; it is a business strategy.
The current system ensures that the true cost of bad advice, which can run into the hundreds of millions for clients like Lendlease or Commonwealth Bank, is never actually borne by the partnership firms themselves.
Protectors of the public or the partners?
The role of Chartered Accountants Australia and New Zealand in this saga raises a profound question of accountability: whose interests do the professional bodies serve?
Lyon’s case alleges that the Professional Standards Council unlawfully extended liability caps to non-accountant personnel who were providing non-accounting services. CAANZ maintains that the inclusion of consultants improves standards, consumer protection and access to compensation through mandatory indemnity insurance.
CAANZ’s response has been telling. Rather than welcoming a review of standards to restore public trust, the body fought Lyon’s attempt to proceed, with estimated recoverable costs reaching $460,000.
NSW Supreme Court Justice Tim Faulkner’s recent landmark ruling granted Lyon a protective costs order, capping his exposure at $25,000 and allowing the trial to proceed.
This reflects a deeper structural issue. All big four members are automatic members of CAANZ, and the firms themselves may pay the membership fees. This creates the perception of a conflict of interest where the professional association regulator is financially and structurally beholden to the very entities and members it is supposed to discipline.
When a professional body potentially spends almost half a million dollars to prevent a whistleblower from challenging a liability shield, it is no longer defending the public interest or the integrity of the auditing profession; it is acting as a defence shield for the big four’s partners.
Taylor’s dismissal of a structural split ignores the sheer scale of the non-audit business. Non-accounting services now account for approximately 80 per cent of big four revenue.
These firms are no longer accounting partnerships in any traditional sense. They are global consulting behemoths that use their historical status as auditors to shield their consulting arms from litigation costs.
Therefore, Lyon’s litigation aims to prove that the current liability scheme unlawfully covers these category 3 services. If he succeeds, firms like KPMG and PwC could face uncapped costs for their advice.
Only then will GSA be curtailed.
This will not happen through yet another ethics seminar, CAANZ training module or a hollow apology, but through the cold, hard reality of legal consequences and financial accountability.
The need for radical reform
The “big con” of the consulting industry has hollowed out public and private sector capacity and allowed a tiny elite to accumulate wealth, even when they leave a partnership for GSA behaviour – all while operating under a veil of secrecy.
The scandals at KPMG, where partners allegedly lied in internal investigations and previously cheated on ethics exams, reflect a culture that knows it’s too big to fail and too protected to care.
Taylor is right that we should not kid ourselves into thinking that simple tweaks will work. Nevertheless, he is wrong to suggest that the problem is merely individual.
We must move beyond the ‘bad apple’ narrative and address the structural rot. Individual greed, stupidity and arrogance can only flourish when the system permits it.
Until we dismantle the secretive partner shield and force these partnership firms to operate with the same transparency and liability as the public they serve, the scandals will continue.
The parliamentary committees should be applauded as they pursue the GSA of partners. This is democracy at work. The Lyon case is not just a legal technicality; it is a battle for the very soul of professional auditors’ accountability in Australia.
