KPMG is facing an existential crisis, says former corruption commissioner — The Business — ABC NEWS

[0:00] just as disgusting behaviour from a commercial and ethical point of view. [0:07] How has the concept of legal professional privilege influenced what we know about KPMG's investigation of this scandal? [0:18] Well, there's two points I'd make. [0:20] The first is that legal professional privilege is a very valuable weapon. [0:24] It's designed to protect the client from disclosure of material passing between the client and the solicitor in relation to proceedings or contemplated proceedings. [0:37] In the present KPMG matter, in my opinion, it's being used, or it appears to be being used, to avoid transparency and openness. [0:48] That's a problem, though, because we want to get to the bottom of what's happened, surely? [0:52] We do want to get to the bottom of what's happened, and that's why I say that by placing reliance upon legal professional privilege, [1:02] there's a danger we won't get to the bottom of it. [1:04] Mind you, the committee that's examining the issues has achieved a bit of a breakthrough. [1:12] I think there's been, with one of the witnesses this week, an admission that certain documents will now be produced. [1:19] And, in any event, the Parliamentary Joint Committee does have a view that it's not restricted by legal professional privilege [1:29] and that it can effectively override it or at least assess whether it's a valid claim or not. [1:35] So, we haven't heard the end of the story on it. [1:38] Now, late last Friday, KPMG Chairman Martin Shepard conceded, as you have mentioned, [1:44] that he agreed to give up the documents after Senator Deborah O'Neill's assurance [1:49] that her committee wouldn't publish them unless absolutely necessary. [1:54] Now, how do you think this will affect KPMG's cause or what it wants to achieve? [1:59] Well, look, I think KPMG's in an impossible position, really. [2:03] You know, they've been caught out well and truly. [2:07] They've been caught out over a number of issues. [2:09] One is their treatment of whistleblowers. [2:11] Two is the actual conflict of interest, a massive conflict of interest, [2:15] that arises when doing audit work. [2:19] They're able to seize valuable material that helps them move in on another client [2:24] and gain a contract that way. [2:25] I mean, that is just shocking behaviour, and it seems to be undoubtedly the truth. [2:30] Well, I'm sure you've heard a lot of flawed internal investigations [2:35] or dealt with a lot of whistleblowers yourself. [2:37] How does this professional drama compare in terms of its severity? [2:42] I think it's much worse because, you know, we're dealing with one of the most respected [2:47] of the big four firms, and the big four firms as a whole [2:51] are the most respected audit and traditional accounting establishments in Australia. [2:59] So it's at a very high level. [3:03] And the real problem is that they're not... [3:07] I mean, the majority of their work is in consulting government work worth millions of dollars, [3:12] which has got nothing or very little to do with traditional accounting at all. [3:17] So, you know, that's an enormous conflict in itself, [3:20] and it's demonstrated, it's been demonstrated in Pricewaterhouse, [3:25] PwC's problems where they've used confidential tax information from the government [3:32] to advise their clients on how to avoid tax. [3:35] Here it emerges again with just as disgusting behaviour [3:38] from a commercial and ethical point of view. [3:42] Look, you've used a lot of strong words there. [3:45] I think what a lot of people want to know, of course, [3:49] is that, you know, you can get a slap on the wrist by the regulator, [3:52] Parliament can give you a grilling. [3:54] But at the end of the day, there are four accounting firms. [3:56] Could there be three? [3:57] Is this an existential crisis for KPMG? [4:01] I think it is. [4:04] I'm a bit disturbed by the fact that all the government has done so far [4:08] is to announce an independent review of KPMG's culture. [4:13] We don't know who's going to do the review, [4:16] but we do know that KPMG has been suspended [4:21] from applying for new work till September. [4:24] That is a slap on the wrist and nothing more [4:26] because they already hold contracts worth millions of dollars of government work. [4:32] You know, I think they're moving down the path where it can be expected, [4:36] it may well be expected, [4:38] that they'll have those contracts stripped away from them. [4:42] Well, Anthony, really, it's always terrific to get your insights. [4:45] Thank you for joining the business. [4:47] Thank you very much.