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Chapter 1: What is the main topic discussed in this episode?
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A simmering scandal at accounting firm KPMG has reached a boiling point with multiple heads rolling and admissions about poor handling of a whistleblower's complaint. And once again, it's raising questions about how the big four accounting firms operate here in Australia. Meanwhile, tariff threats from the United States have surfaced once again.
What exactly does it mean for Australian businesses? Welcome to ABC Business Daily.
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Chapter 2: What led to the KPMG scandal and what are the key allegations?
They have businesses that cross into lots of different areas, but there are very strict rules, understandably, about not utilizing information you have in part of your business or the work you're doing on behalf of certain clients in order to then win you business elsewhere.
And so the accusation really goes to the trust about how these organizations are utilizing the information that they have access to.
Well, exactly. And look, it can be a little bit different if you look at the big four firms. So that's KPMG, PWC, EY and Deloitte. They have units that span from audit, tax and consulting. And the consultants have always been a little bit more flexible with what they do. But the auditing division, that's historically those guys are the super straight, really nerdy people.
They're basically the watchdog for the market. So they need to be completely independent and they need to have absolutely no conflicts. I mean, they all should have no conflicts, but it's particularly important for auditors.
We have seen now multiple heads roll at KPMG, but what have they actually admitted they've done wrong in addition to at least they say that they recognise that they did not treat the whistleblower's complaint in the way that they should have?
Well, they are obfuscating, for want of a better word, in terms of coming clean with what they've done and when approached, which I feel like I approach them kind of 15 times a day at the moment, as I'm sure every other journalist does too. They say, well, they've got to let the investigation unfold, the new investigation into what happened. But what they have admitted...
to one of their clients, Lendlease, is that confidential board documents that they shouldn't have been looking at at all had been accessed by several senior audit partners. So that's the only thing that they have confirmed, not to the media, but only to that client, Lendlease.
And Lendlease has then told Senator O'Neill.
Lendlease told Senator O'Neill. But what we also know is that they have also told Singtel Optus that their documents were also inappropriately accessed. And that was in the hope that they would then be able to win the bigger cat in town being Telstra. which they didn't win actually anyway.
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Chapter 3: How has KPMG's handling of whistleblower complaints been criticized?
So that was that was on the consulting tax side of things. And this one is kind of sitting fairly squarely in the well, at this point in time anyway, in the in the audit side. But both are massive conflicts. And as I have
mentioned a few times in my articles for The Australian, it's really this issue of profit over principles, which I think that when you are seeing that in your watchdog, that's quite concerning. I mean, what do you think?
I mean, one of the things I found most extraordinary about this particular scandal is that KPMG actually provides whistleblower advice to other organizations, including the RBA. So you have this organization who is helping other companies put in place processes to make sure that whistleblower complaints are heard and dealt with appropriately.
and by their own admission, have completely failed again in this particular episode. And also the fact that it took two years from the whistleblower raising these concerns, it appears, and it has now taken someone from the parliament to actually raise them under parliamentary privilege, which obviously means that they can't be sued and they have special powers that even journalists don't have.
That seems one of the most... extraordinary parts of this to me. And also what is now being raised, which I must admit, I wasn't fully aware of this, that because they're a partner model, the way that these big four operate, that they don't have the same responsibilities and they're not treated in the same way that a commercial organization would be, a for-profit corporation.
And so it appears that the punishment available to be meted out to them isn't as strong as it would be if they were operating under a different model. Is that right?
That's exactly right. And I mean, there's a few pieces to that. But so the Corpse Act, which is... what most companies sit under has very strong rules about all sorts of things, one of which is whistleblower rules. And if you take the time to read the Corpse Act, it actually specifically separates out big auditing and consulting firms. They're not caught up in it. It's written in the Act.
They're completely carved out of those particular parts of the legislation.
They're completely carved out. And that, to me, seems odd and obviously needs to be changed. So there's that side of things. And then there's also the issue of what happens if something goes wrong. And there's a court case that I think is about to start kind of kicking off that has been brought by another former KPMG partner, who was a former whistleblower.
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Chapter 4: What actions have been taken against KPMG executives in response to the scandal?
And if they don't find a new home quickly, they will face another set of problems because Senator Deb O'Neill, who has been So integral to shining a light on the consulting industry has now just taken over the parliamentary joint committee that's just been set up a couple of weeks ago looking at defence. Right. So I think.
She could be very important in the defence sphere going forward.
I don't think that she really loves the way KPMG has behaved over this.
Yeah, fascinating. One to watch and people should be reading your great work in The Australian. Now, one of the other interesting things that's happened for the Australian economy was, once again, the US seems to be trying to brick up its tariff war. Now, people might remember Donald Trump last year cast our minds back.
He had the Liberation Day tariffs where he announced sweeping tariffs on almost every country on earth. Now, Australia... was relatively well treated in that first tranche. We had the minimum baseline tariff 10%. Wasn't great, worse than it was before, but it was relatively good.
Donald Trump has faced a lot of setbacks in his attempts to keep the tariff wall strong, including the Supreme Court overturning most of those tariffs. Now, we knew that he was trying to find a solution to the problem. The man is very wedded to tariffs. This is one of the through lines throughout his political career.
Sometimes Donald Trump can seem to be jumping all over the map politically, but he seems to genuinely believe tariffs are a good thing for the American economy.
He loves a tariff.
He loves a tariff. And so now we have this situation where the suggestion is Australia will be paying a slightly higher tariff than we currently are, 12.5%. Australia is kind of in the bad group. There's a group that's going to get a 10% tariff, which includes the European Union and the UK. They're still getting a 10% tariff, but they're in the good group.
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