Scandals at top firms spur calls for shakeup in Australia

Australia's consulting sector has lurched once again into scandal, raising fresh calls for reforms from lawmakers and insiders to safeguard confidential business and government data.

Junior staff at consulting giant EY allegedly accessed Australian Prime Minister Anthony Albanese's bank details before they were detected and fired, Bloomberg reported Tuesday. It comes more than a week after lawmakers spent over 10 hours in parliament grilling current and former KPMG Australia partners over claims the firm used private client information to win lucrative audit contracts.

The litany of transgressions across major audit, consulting and accounting firms in Australia in recent years has amplified calls to overhaul the industry, which rakes in billions of dollars in revenue every year from customers including the government, corporations and nonprofits. 

"Australians have had enough of the repeated scandals," said Barbara Pocock, a senator for the Australian Greens party who is among lawmakers pushing the industry to change. The Big Four firms "play by their own rules and get away with it, again and again," she said. 

At the crux of her argument, Pocock wants these partnerships to fall under the Corporations Act and to split their audit and consulting arms. PwC jettisoned its government consulting business in 2023 for a dollar after it fed confidential government tax information to corporate clients. 

Then last year, Deloitte Australia used artificial intelligence to write a government report riddled with errors. Pocock and other critics say almost no changes have occurred that would stem such bad behavior.

Meanwhile, KPMG Australia has agreed to not bid for new federal government work for three months and last week unveiled a plan to overhaul its leadership and review its ethics. The moves attempted to draw a line under the scandal, which has already led to the departures of its chair and chief executive.

At stake is also the security of confidential data from sources as varied as the Defense Department, Australia's largest companies including banks, and individuals such as the Prime Minister.

"The steady stream of proven cases of serious conflict of interest abuse over the past two decades points to a structural problem," said Alex Carmichael, former partner at consultancy IBM Promontory, who now runs regulatory compliance firm ausaml.com. "Resisting temptation gets harder as the volume and value of sensitive information grow. Size does not make failure inevitable, but in my view it does make it more likely that one of these conflicts eventually goes wrong," he said.

Consulting and auditing firms are coming under pressure globally, not just in Australia. Saudi Arabia, once a lucrative source of work, has begun scaling back its reliance on external consultants, slashing engagements that previously generated hundreds of millions of dollars in fees for firms such as Boston Consulting Group and McKinsey & Co. 

Accenture Plc's shares tumbled this month after the company warned that revenue would slow, as artificial intelligence disrupts the consulting industry and clients delay spending amid conflict in the Middle East.

While greater use of AI at consulting firms may lead to more issues in the future, the recent developments in Australia relate to poor human judgment, said Oluchi Ikechi-D'Amico, a former partner at EY, who now runs her own leadership advisory company in Hong Kong.

"It's about to get harder, not easier as firms race to put more AI in more hands, faster," she said. "The tools are getting more powerful and the guardrails around judgment may not keep up."