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Wells Fargo: Did KPMG Perform Its Duties? An Auditing Case About Consumer Fraud

Feng, N. C., Fuerman, R. D., & Heron, N. (2022). Wells Fargo: Did KPMG perform its duties? An auditing case about consumer fraud. Corporate Ownership & Control, 19(2), 121–126. https://doi.org/10.22495/cocv19i2art10

6 Pages Posted: 21 Sep 2022

Nancy Chun Feng

Suffolk University

Ross D. Fuerman

Suffolk University - Department of Accounting

Nicole M Heron

Babson College - Accounting and Law Division; Suffolk University - Department of Accounting

Date Written: February 18, 2022

This article describes the implementation of a case study that uses as its setting the role of KPMG in the Wells Fargo consumer fraud scandal as a way for students to learn about what can happen during an audit failure and what should be done to prevent audit failure. As the case details illustrate, it features the only recent significant Big 4 audit failure that is still being resolved, the audit failure includes many aspects of an auditor’s job, including some that typically are not covered in traditional course textbooks, and it highlights the auditor’s role within the broader context of corporate governance. This case study exposes students to several auditing standards and laws related to 1) consumer fraud; 2) contingent liabilities; 3) materiality; 4) illegal acts; 5) audit evidence; 6) audit opinions; 7) auditor independence and mandatory rotation; 8) auditor liability under the Securities Act of 1933; and 9) auditor liability under the Securities Exchange Act of 1934. The case was used in two undergraduate auditing classes and a graduate auditing class. Student opinion surveys were used to ascertain the learning outcomes of the case study. The survey results suggest strong student engagement and support for learning in groups while collaborating on the case study. The case results also show particularly strong knowledge enhancement with regard to understanding the auditor’s duty to disclose illegal acts, understanding consumer fraud, understanding audit evidence, understanding materiality, and understanding contingent liabilities.

Keywords: Illegal Acts, Consumer Fraud, Audit Evidence, Materiality, Contingent Liabilities, Auditor Regulation

JEL Classification: M420, M480, K420

Suggested Citation: Suggested Citation

Suffolk University ( email )

120 Tremont St Boston, MA 02108 United States 617-573-8719 (Phone)

Ross D. Fuerman (Contact Author)

Suffolk university - department of accounting ( email ).

Sawyer Business School Department of Accounting Boston, MA 02108 United States 617-573-8615 (Phone)

HOME PAGE: http://www.suffolk.edu/business/faculty/12328.php

Babson College - Accounting and Law Division ( email )

Babson Park, MA 02157 United States

Sawyer School of Management Boston, MA 02108 United States

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The KPMG Case Interview

• Seven Key Facts About the KPMG Case Interview
• The KPMG Ethos: Beyond Just Numbers
• The Preparation
• Crafting the Blueprint
• Navigating the Data Maze
• Eloquent Communication
• Embracing Fluidity
• The Growth Mindset
• Embarking on the KPMG Voyage: The Road Ahead
• Further Reading

KPMG, a well-established firm in audit, tax, and advisory services, has built a strong global presence through its consistent focus on quality. In the ever-changing field of consulting, KPMG's interview process, especially the case interview, stands as a crucial test for candidates aspiring to join the firm. This stage of the interview evaluates analytical skills in the context of practical business scenarios.

The following are seven tips that you should read, before you start to prepare for your case interview at KPMG to get your dream job.

At its core, KPMG seeks individuals who resonate with its values and vision . While technical expertise is crucial, the firm places equal emphasis on cultural fit, interpersonal skills, and a genuine passion for consulting .

Tip: KPMG's ethos revolves around integrity, excellence, and collaboration. As an aspiring consultant, aligning your mindset with these principles can be the key to unlocking the doors of KPMG.

Consulting is vast and ever-changing . KPMG's case interviews often mirror real-world scenarios, underscoring the importance of a holistic preparation strategy.

Tip: Dive into industry reports, stay updated with global events, and immerse yourself in KPMG's past case studies. The more diverse your preparation, the more equipped you'll be to tackle unexpected case twists.

A structured approach is the backbone of any successful case analysis. KPMG values candidates who can systematically dissect problems, prioritize issues, and weave actionable solutions .

Tip: Frameworks are invaluable, but they're just the starting point. Customizing your approach based on the case's nuances can set you apart. Think of frameworks as tools in your arsenal , not rigid templates.

In today's data-driven age, q uantitative acumen is indispensable . KPMG's cases often involve intricate data analysis , demanding both speed and precision.

Tip: Regularly challenge yourself with diverse quantitative exercises . From market sizing to financial modeling, mastering the numbers can be your secret weapon.

The most brilliant solutions can falter if not communicated effectively. KPMG cherishes candidates who can articulate complex ideas with clarity and impact.

Tip: Storytelling is an art. Practice weaving your analysis into a compelling narrative. Remember, your audience isn't just looking for answers; they're seeking insights.

Real-world consulting is replete with surprises. KPMG's case interviews emulate this dynamism, challenging candidates to adapt on the fly.

Tip: Cultivate a flexible mindset . When the case throws a curveball, embrace it. Use new information as a pivot, not a stumbling block.

KPMG is a bastion of continuous learning. The firm values individuals who view feedback as a growth catalyst , not just post-interview commentary.

Tip: Every piece of feedback is a treasure trove of insights. Internalize it, act on it, and let it guide your consulting journey.

The KPMG case interview is more than an evaluative hurdle; it's a microcosm of the consulting universe. It's a realm where challenges are opportunities, where every problem is a story waiting to be unraveled . As you stand on the cusp of this journey, remember that success at KPMG isn't just about cracking the case; it's about crafting a legacy.

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KPMG Inspection Cheating Case Wraps But Painful Lessons Linger

By Amanda Iacone

One of the worst ethics breaches in the modern era of auditing ended with a fizzle recently as the last criminal conviction tied to a scheme to falsely inflate KPMG’s inspections results was tossed out.

The federal criminal case may have crumbled but that doesn’t negate the legacy of the inspections cheating scheme that tarnished the reputation of one of the largest firms in the US and undermined a process that is meant to protect investors.

KPMG paid a $50 million penalty. CPAs lost their licenses and livelihoods. Reforms were adopted. And the lessons for a profession that bills itself for being trusted, independent arbiters remain intact.

“The profession demands, expects integrity and this is just blatant defiance of all the professional standards,” said Bob Conway, an author and former inspector with the US audit regulator.

Congress in 2002 formed the Public Company Accounting Oversight Board in the wake of frauds that toppled Enron and WorldCom auditor Arthur Andersen, giving the regulator authority to inspect routine audit work and investigate failures.

Inspection results offer an important gauge of firm performance. KPMG in 2017 uncovered that some of its most senior staff conspired to rely on stolen details about which audits the regulator planned to review and then doctored its work to lift its results.

Top leaders of KPMG’s audit practice plus former PCAOB employees—two the firm poached and one who stayed at the regulator—were among those involved in the plot. The combination of regulatory staff and high-ranking auditors sets the scandal apart from other recent ethics probes from auditors cheating on training exams to the leak of the Australian government’s tax plans.

Regardless the outcome of the criminal case, a rash of rules, laws, and professional obligations remain in force that police auditors and any temptations to skirt those requirements.

“The PCAOB does not tolerate any improper sharing of its confidential information, and we will strictly enforce our rules, standards and ethics code to maintain the integrity of our oversight on behalf of investors,” board Chair Erica Williams said in a statement.

KPMG declined to comment.

Six people involved in the scheme were convicted of federal fraud charges and some were sentenced to prison or supervised release. One was deported as a result of his guilty plea.

But in August 2023 the federal government’s criminal case fell apart over the definition of property.

The US attorney’s office for the Southern District of New York sought to dismiss charges against David Middendorf, former national managing partner for audit quality at KPMG, and Jeffrey Wada, a former inspections leader with the US audit regulator.

Prosecutors determined that the audit board’s inspection plans at the heart of the case weren’t “an object of fraud” under US wire fraud statutes, citing recent court rulings.

“It had value only in the ‘exercise of regulatory power,’” and not in the government’s role “as property holder,” prosecutors said in court filings.

Dropping the charges “was just and long overdue,” Middendorf’s lawyer Nelson Boxer, a partner with Petrillo Klein & Boxer LLP, said in a statement. “Mr. Middendorf never committed a crime.”

Co-defendants David Britt, Thomas Whittle, and Brian Sweet successfully petitioned the court to vacate their convictions on similar grounds.

Cynthia Holder , a former PCAOB inspector who left to work for KPMG, became the last to have her conviction vacated on March 8.

“Mr. Britt is obviously relieved that the courts have recognized the fatal flaws in these criminal charges and is very much looking forward to finally being reunited with his family,” his lawyer Rob Stern, a partner with Weil Gotshal & Manges LLP, said in a statement. Britt remains in Australia where he was deported.

Attorneys for Whittle declined to comment. And lawyers representing Holder and Sweet didn’t respond to requests for comment.

Consequences

The threat of a criminal record wasn’t the only consequence facing the auditors.

The firm’s former vice chair for audit Scott Marcello agreed to a $100,000 penalty for not intervening to halt the inspections scheme.

The six who faced criminal charges also were barred from appearing before the Securities and Exchange Commission. Most lost or surrendered their CPA licenses.

Wada and Middendorf also faced additional administrative penalties but the SEC dropped the case due to a server access issues that led to 42 cases in total being dismissed.

“The entire regulatory system is threatened by this kind of behavior and so they threw the book at these people,” said Michael MacPhail, a securities lawyer and partner with Faegre Drinker Biddle & Reath LLP.

Lessons Learned

No audit is perfect and mistakes happen. But the incentives to produce effective audits or to limit inspection findings don’t always hit their mark.

The inspections plot offers a case study of what happens to auditors under tremendous pressure: they will make poor judgments, Conway said.

“It is a delicate dance between respecting the process and being so overly fearful that you would do anything to escape the punishment,” said Kecia Williams Smith, an assistant accounting professor at North Carolina A&T State University.

Regulators who second-guess auditors’ work add to the stresses that these accountants face. Yet those routine reviews are meant to ensure auditors serve as an effective check against corporate managers and deliver reliable financial reporting into the hands of investors.

They also serve as a backstop for auditors. They can point to the board’s rules and scrutiny when they need to rein in clients who would stretch the bounds of US accounting rules.

“Expect someone to come in and mark our homework,” said Paul Dunlop, chief operating officer of Sóta Signal Analytics. “Nobody likes to have someone looking over their shoulder—but that’s the game.”

How firms respond to errors or inspection findings also matters, Williams Smith said.

Firms need to support frontline auditors to learn from those mistakes. That takes resources and planning up front to set up auditors for success—from assigning the best auditors to the highest risk clients to giving staff the tools and training they need to do the work, Williams Smith said.

“That’s the kind of culture that will really move quality forward,” she said.

Both KPMG and the board rolled out a series of reforms to prevent similar abuses in the future.

At the PCAOB , that included stronger security controls around its internal data. The board also set up an internal ethics tip line and created an enterprise risk management office.

KPMG , which agreed to $50 million settlement with the SEC, pulled its internal inspections staff outside the audit practice. The firm also added independent directors to its governance board and invested heavily to modernize its suite of audit tools.

“It’s one of those horrific experiences that nobody wants to go through again. And so the firms learned painful lessons; the individuals learned painful lessons,” Conway said.

To contact the reporter on this story: Amanda Iacone in Washington at [email protected]

To contact the editors responsible for this story: Jeff Harrington at [email protected] ; Meg Shreve at [email protected]

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Hacking the Case Interview

For those interviewing for KPMG advisory or consulting roles, KPMG interviews consist of case interviews, a written case interview, and behavioral or fit interview questions. There are typically three rounds of interviews that candidates go through before receiving a KPMG job offer, but the interview process slightly varies by office.

Typically, you should expect an interview process similar to the following:

• First round : Two 30-minute interviews. One interview will be focused on a case interview while the other is focused on behavioral or fit interview questions.
• Second round : A 30- to 40-minute behavioral or fit interview, a 30- to 40-minute case interview, and a 60-minute written case interview for a total of three interviews.
• Third round : Some candidates may be given a third round of interviews. Expect two to three 30- to 40-minute interviews. These interviews are typically focused on behavioral or fit interview questions, but you may also be given case interviews.

If you have an upcoming KPMG advisory or consulting interview or are expecting to interview with them, we have you covered.

While KPMG does provide  eight KPMG interview tips , their advice is fairly generic and not that useful. In this article, we’ll go into more detail on exactly what to expect in your KPMG advisory or consulting interview. We’ll cover:

• The 4 steps to solve any KPMG case interview
• KPMG case interview examples
• How to ace the KPMG written case interview
• The 10 most common KPMG behavioral or fit interview questions
• Recommended KPMG case interview resources

If you’re looking for a step-by-step shortcut to learn case interviews quickly, enroll in our case interview course . These insider strategies from a former Bain interviewer helped 30,000+ land consulting offers while saving hundreds of hours of prep time.

The 4 Steps to Solve Any KPMG Case Interview

A case interview, also known as a case study interview, is a special type of interview that nearly every single consulting firm uses. KPMG case interviews simulate what the consulting job will be like by placing you in a hypothetical business situation in which you are asked to solve a business problem.

You will need to ace every single case interview in order to land a KPMG job offer.

KPMG case interviews are all candidate-led. You will be in the driver’s seat of the case interview and will be expected to ask the right questions, perform the right analyses, and decide the direction of the case.

Follow these four steps to solve any KPMG case interview or case study interview:

1. Understand the case

The case will begin with the interviewer giving you the case information. While the interviewer is speaking, make sure that you are taking meticulous notes on the most important pieces of information. Focus on understanding the context of the situation, the company, and the objective of the case.

Don’t be afraid to ask clarifying questions if you do not catch something. If you are not familiar with the industry, it is completely acceptable to ask how it works. Sometimes, repeating the information back to the interviewer is helpful to confirm your understanding of the case.

Finally, make sure to verify the objective of the case. Not addressing the right business question is the quickest way to fail a case interview.

2. Structure the problem

Develop a framework to help you tackle the business problem. A framework is a tool that helps you structure and break down complex problems into smaller, more manageable components. With a framework, you’ll be brainstorming different ideas and organizing them into different categories.

It is completely acceptable to ask the interviewer for a moment of silence so that you can collect your thoughts and think about the problem.

Once you have identified the major issues or areas that you need to explore, walk the interviewer through your framework. They may ask a few questions or provide some feedback.

For a complete guide on how to create tailored and unique frameworks for each case, check out our article on case interview frameworks .

3. Solve the problem

Once you have developed a framework, you can begin to solve the problem. To solve the case, you’ll likely need to answer a mix of quantitative and qualitative questions.

When solving quantitative problems, make sure to walk the interviewer through your approach before doing any math. Check if the interviewer has any further information for you before making your own assumptions. Finally, neatly label your calculations and write out all numbers so that the interviewer knows exactly what you are doing. 

When answering qualitative questions, try to structure your answer in a logical way to make it easier to brainstorm or communicate your point of view.

For both quantitative and qualitative questions, make sure to go beyond just answering the question. Think about how your answer impacts the answer to the case. Always try to tie the implications of your answers to the case objective. This will help you develop a hypothesis for what a potential recommendation could be.

4. Make a recommendation

In the last step of the case interview, you’ll present your recommendation and provide the major reasons that support it. You do not need to recap everything that you have done in the case, so focus on summarizing only the facts that are most important.

It is also good practice to include potential next steps that you would take if you had more time or data. These can be areas of your framework that you did not have time to explore or lingering questions that you do not have great answers for.

KPMG Case Interview Examples

Below are some examples of KPMG case interviews or case study interviews that past candidates have received. These should give you an idea of the types of cases you may see on your interview day.

For more practice, check out our article on 23 MBA consulting casebooks with 700+ free practice cases .

Example #1: National Zoo

Your client is one of the oldest national zoos in the United States. The zoo hosts over 2,000 animals in its 150-acre park. Your client is looking to increase revenues and profits and is considering purchasing a giant panda from China to place in its newest exhibit. You have been hired to help them make this decision. What would you recommend?  

Example #2: Brewing Company

Our client is the largest American beer brewing company. The American beer market is dominated by three large players. The rest of the market is comprised of small mom and pop breweries.

What would happen to our client if the second largest and third largest American brewing companies decided to merge?

Example #3: Chemical Company

Your client is a privately owned chemical manufacturing company that specializes in producing car wash chemicals. After a series of aggressive acquisitions, your client has become the market leader in car wash chemicals, but revenue growth has been flat over the past few years.

Your client is looking to increase revenues by 20% without reducing profit margins over the next two years. How would you go about achieving this?

Example #4: Yoga Studio

Your client is Ms. Johnson, the proud owner of an up-scale yoga studio in New York City. Her yoga studio is known for high quality instruction and a relaxing atmosphere. Ms. Johnson has been operating the studio for the past five years.

Over the past year, your client has made a few major investments, but has noticed that her profits have been declining. How would you determine what is causing the decline in profits and what should be done to address it?

Example #5: Pharmaceutical Company

Your client is Pfizer, an American pharmaceutical company that develops and produces medicines and vaccines in a wide range of therapeutic areas. The CEO is worried about the company’s financial performance five years from now, when three of their blockbuster drugs come off patent.

What can Pfizer do to ensure that it continues to grow and be profitable?

Example #6: Insurance Company

Our client is an American auto insurance company. They are the second largest auto insurer in the United States and provide coverage for more than 30 million motor vehicles and more than 20 million policy holders.

Until recently, most car insurance is sold to car owners by insurance brokers. Insurance companies pay brokers a commission for each policy sold. Recently, car owners have started buying insurance directly from insurance companies over the phone.

You have been hired to help our client determine whether they should invest more in selling policies direct to customers over the phone.

How to Ace the KPMG Written Case Interview

Here’s how the KPMG written case interview works:  

• The interviewer will give you a packet of 20 – 40 pages of graphs, charts, tables, notes, and other text
• You’ll have anywhere between 45 - 60 minutes to analyze the information in the packet and make slides to present your analysis and recommendation
• Afterwards, you will present your slides to the interviewer who will ask follow-up questions on your analysis and findings

Follow the steps and tips below to ace your KPMG written case interview.

1. Understand the business problem and case objective

The first step in completing a written case interview is to understand what the objective is. What is the primary business question you are trying to answer with the data and information provided?

Answering or solving the wrong business problem is the quickest way to fail a written case interview. Therefore, the first thing you should do is to read the instructions and the case background information so that you clearly understand the primary question you are trying to answer.

2. Read the list of major questions

Some written case interviews will provide you with a list of 3 – 4 key questions that you will be expected to address or answer.

Once you understand the overall business problem and case objective, read through the list of key questions. This will tell you what the most important areas of the case are. These will be the questions that you want to investigate and answer first.

If the written case interview is more open-ended and does not provide you with a list of key questions, skip this step and move onto the next step.  

3. Quickly flip through the material to identify what information exists

The next step is to flip through the information packet that is provided to see what information is available. Identify what data you have and what data you do not have.

If the written case interview has provided you with pre-filled slide templates, make sure to flip through those as well.

The goal in this step is not to read and analyze every slide. That would take too much time.

Instead, you want to get a sense of what data and information is out there. This will help you decide and prioritize which slides are most important to read and analyze in more detail later.

4. Create a framework

Before you begin reading and analyzing the information in the slides in more detail, you should create a basic framework to help guide your analysis.

Select 3 to 4 broad areas that you think are the most important to analyze. In other words, what are the 3 to 4 things you need to know to answer the primary question of the written case interview?

If the written case interview has provided you with a list of 3 – 4 key questions, make sure to include these important areas in your framework.

Sometimes, these 3 – 4 key questions are your entire framework and you will not need to add anything else. Other times, you may identify important areas from flipping through the slides that you want to add to your framework in addition to these 3 – 4 key questions.

If the written case interview has provided you with pre-filled slide templates, these slides often provide clues on what the most important areas are.

5. Match information that exists to areas in your framework

Now that you have a solid framework to guide your analysis, the next step is to identify what information you can use to answer each area of your framework.

Since you have already flipped through the material and catalogued what information exists, you can match different pieces of information that exist to areas in your framework.

6. Read and analyze the material

The framework you created tells you what questions you need to answer. From the previous step, you know which slides the information is in to answer each question. All that is left to do is to read and analyze the information that is relevant to each area of your framework.

As you answer the major questions in your framework, make sure to write a one or two sentence summary of the key takeaway or answer. This will help you remember the work that you have done and make it easier to decide on a recommendation.

7. Decide on a recommendation

Once you have finished reading and analyzing all of the important and relevant material, you should have a list of key takeaways or answers to the major areas of your framework.

In this step, you’ll read through the key takeaways and decide on what recommendation they collectively support.

You should not expect every key takeaway to support your recommendation. Often, you’ll have key takeaways that support your recommendation, but also key takeaways that go against your recommendation.

If this is the case, you’ll need to mediate conflicting insights and decide on which insights are the most important. Remember that there is typically no right or wrong recommendation. As long as your recommendation is supported by data and evidence, you will be in great shape.

8. Structure your presentation slides

When you have decided on a recommendation and have the supporting data and evidence for it, you’ll want to create a structure for your presentation slides.

A simple, but effective structure you can use is:

• Slide 1: Present your recommendation and the three reasons that support it
• Slide 2: Present your first reason and the data that supports it
• Slide 3: Present your second reason and the data that supports it
• Slide 4: Present your third reason and the data that supports it
• Slide 5: Summarize everything that you’ve covered so far
• Slide 6: Present potential next steps

If the written case interview has already provided you with pre-filled slide templates, the structure of your presentation slides may already be decided for you. If not, you can incorporate the pre-filled slide templates into your overall presentation structure.

9. Fill in your slides

Once you have the structure of your presentation slides, the next step is to fill in the slides with content.

When filling in slides, make sure you use descriptive slide titles that clearly communicate the main message of the slide.

Additionally, try to make your slides easy to digest. Each slide should have one key message.

10. Review your slides and prepare for potential questions

If you have time remaining, review your slides one more time to check for any mistakes or errors. You can also spend some time cleaning up the slides to make them look neat and polished.

Afterwards, you can brainstorm potential questions the interviewer may ask you during your presentation. They may want to know how you performed your analysis or reached your conclusions. They may also challenge your assumptions or interpretations of the data.

Preparing for potential questions that could be asked will help your presentation go much more smoothly and you’ll feel much more confident while presenting.

For a full guide on written case interviews, check out our consulting written case interview step-by-step guide .

The 10 Most Common KPMG Behavioral or Fit Interview Questions

In addition to case interviews, you will likely be asked a few behavioral or fit interview questions. There are ten questions that are most commonly asked.

1. Why are you interested in working at KPMG?

How to answer: Have at least three reasons why you’re interested in working at KPMG. You could mention that you loved the people that you have met from KPMG so far. You can talk about KPMG’s massive global presence and expertise in nearly every industry and function. You can speak to KPMG’s work culture and their emphasis on work life balance. Finally, you can mention their investment in their consultant’s professional development through their Continuing Professional Education (CPE) courses.

2. Why do you want to work in consulting?

How to answer: Again, have three reasons why you’re interested in consulting. You could mention the fast career growth opportunity, the opportunity to develop soft and hard skills, or the level of impact that you can make by working with large companies on their most challenging issues.

3. Walk me through your resume

How to answer: Provide a concise summary of your work experience, starting with the most recent. Focus on emphasizing your most impressive and unique accomplishments. At the end, tie your experiences to why you are interested in consulting.

4. What is your proudest achievement?

How to answer: Choose your most impressive, unique, or memorable accomplishment. Structure your answer by providing information on the situation, the task, the actions you took, and the results of your work.

5. What is something that you are proud of that is not on your resume?

How to answer: This is a great opportunity to highlight an accomplishment that is not related to your professional work experience. Perhaps there is a non-profit that you volunteer at, a side project or business that you work on, or a hobby that you have won awards or recognition for. Choose something that is impressive and interesting.

6. Tell me about a time when you led a team.

How to answer: If possible, choose a time when you directly managed a person or a team. For this question and the following questions, make sure that you structure your answer. Structure your answer by providing information on the situation, the task, the actions you took, and the results of your work. This is known as the STAR method and is commonly used to answer behavioral or fit interview questions.

7. Give an example of a time when you faced conflict or a disagreement.

How to answer: When answering this question, focus on emphasizing the steps you took to resolve the conflict or disagreement. Speak to the interpersonal skills you had to use in order to mediate the situation. Interviewers want to know that you are a great mediator and that you can handle conflict in a constructive way.

8. Tell me about a time when you had to persuade someone.

How to answer: Choose a time when you were able to change someone’s mind. Focus on emphasizing the steps that you took to persuade that person and what impact and results this had. Interviewers want to know that you are a great communicator and a good people person.

9. Describe a time when you failed.

How to answer: Choose a time when you failed to meet a deadline or did not meet expectations. Focus on emphasizing what you learned from the experience and how you used that experience to deliver even better results in the next opportunity that you got. Interviewers want to see that you don’t get discouraged from failure and that you treat those experiences as learning opportunities.

10. What questions do you have for me?

How to answer: This is a great opportunity to get to know the interviewer on a more personal level. Ask them questions about their experience in consulting or their career. Express genuine interest in what they have to show and ask follow-up questions. The more you can get the interviewer talking about themself, the more likely they will have a positive impression of you.

For more help on KPMG behavioral or fit interview questions, check out our complete guide on consulting behavioral interview questions .

Recommended KPMG Case Interview Resources

Here are the resources we recommend to learn the most robust, effective case interview strategies in the least time-consuming way:

• Comprehensive Case Interview Course (our #1 recommendation): The only resource you need. Whether you have no business background, rusty math skills, or are short on time, this step-by-step course will transform you into a top 1% caser that lands multiple consulting offers.
• Hacking the Case Interview Book   (available on Amazon): Perfect for beginners that are short on time. Transform yourself from a stressed-out case interview newbie to a confident intermediate in under a week. Some readers finish this book in a day and can already tackle tough cases.
• The Ultimate Case Interview Workbook (available on Amazon): Perfect for intermediates struggling with frameworks, case math, or generating business insights. No need to find a case partner – these drills, practice problems, and full-length cases can all be done by yourself.
• Case Interview Coaching : Personalized, one-on-one coaching with former consulting interviewers
• Behavioral & Fit Interview Course : Be prepared for 98% of behavioral and fit questions in just a few hours. We'll teach you exactly how to draft answers that will impress your interviewer
• Resume Review & Editing : Transform your resume into one that will get you multiple interviews

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Professional Ethics of Auditors: The Case of Serba Dinamik

The recent dispute between a listed corporation, Serba Dinamik Holdings Berhad (“Serba Dinamik”) and KPMG has made waves in Malaysia as the impending legal suit is allegedly linked to negligence, breach of contractual and statutory duties of the audit firm.

Serba Dinamik is a Malaysian-based investment holding company, which manages the Serba Dinamik Group and CSE Global Ltd. The Group provides information technology (IT) solutions, energy and engineering services, mainly to the Oil and Gas (O&G) and power generation industries. The suit commenced after KPMG red-flagged several issues on Serba Dinamik’s bills and transactions in the draft Annual Report for the year ended 31 December 2020. It was understood that KPMG was unable to verify the details of the third parties for these transactions.Citing publicly available information, KPMG has denied the allegations and has stepped down from its duties as the external auditor due to being unable to continue with its duties independently. Upon the legal action taken by Serba Dinamik, five independent and non-executive directors of Serba Dinamik have resigned, with four of them expressing their disagreement over said decision, and on 25 June 2021, the company’s stock price dived to an all-time low of 23%.

Auditors in Malaysia are guided under Section 320 of the Capital Markets and Services Act 2007 (“Act”), which states that auditors are required to report to the Securities Commission Malaysia (“SC”), as well as Bursa Malaysia, any cases that adversely affect the financial position of the public listed company to a material extent, or any breach of securities laws and rules of the stock exchange. It is worth noting that under Section 128(2) and 320(2) of the Act, it posits that auditors are not liable to be sued in any court with respect to any statement submitted by the auditor in good faith and in the intended performance of any duty imposed on the auditor. By following the Act, the auditor enjoys these privileges due to its obligations to provide an independent report and not be influenced by other parties.

In order for Serba Dinamik to be successful in their legal claim, the management is required to show proof that KPMG has, in fact, breached its duties, as well as on the grounds of alleged professional negligence, breach of contract and breach of statutory duty. Regardless of the final outcome of the dispute, this audit issue serves as a reminder to the members of the accounting profession to uphold the principles of trustworthiness, transparency, and accuracy in independent financial reporting. Auditors are obligated to report any breaches or irregularities immediately to the SC.

Leaders of accounting firms should serve as role models by ensuring that the codes of conduct filter down through the entire organisation, to fully prepare auditors as they navigate potential ethical dilemmas. It is crucial for auditors to build public trust by advocating professional and personal ethical values to avoid potential publicised failures, which can tarnish the reputation and values of the accounting profession.

Contact us:

• ECOVIS Malaysia

Vincent Lee Weng Seng

• +603 7981 1799

KPMG Case Interview 2024: Format, Technique & Tips

KPMG is a highly desirable workplace for many people, making the competition to land a job quite fierce. One of the challenging assessments you must encounter to become an employee at KPMG is the KPMG case interview, a practical screening tool used to assess a candidate's analytical and problem-solving skills.

Overview of KPMG case interview

KPMG case interviews are often candidate-led. The candidate will be leading or taking control of every step ahead to solve the case. This includes structuring the problem, drawing frameworks, asking for data, synthesizing findings, and proposing solutions. 

The KPMG case interview occurs in the last stages of KPMG’s recruitment process and typically lasts 30-45 minutes.

KPMG case interview occurs in the last stage of the recruitment process

There are three standard stages that occur during the KPMG recruitment process: Online application ⇒ Online assessments ⇒ Interviews.

Stage 1: Online application

The application stage for KPMG is relatively straightforward, which involves filling out an online form and submitting your resume and cover letter. These documents must showcase your relevant skills, educational background, and achievements in previous work. By that, KPMG can assess your potential and suitability for the job.

Stage 2: Online assessments

KPMG Online assessment is designed to assess potential candidates for their mental capability, problem-solving skills, and work personalities. There is no consistent test format across locations and positions; however, there are some common test formats, as follows:

Game-based behavioral assessment: psychometric games, such as “KPMG Ready” and “Cognify and Emotify”, assess the cognitive capability and decision-making style of candidates.

Aptitude test: a computer-based test type that comes in three parts: numerical, verbal, and inductive reasoning.

Scenario-based test: a situational judgment test including given scenarios and a series of questions, which tests your working behavior and personal fit.

Stage 3: Interviews

The KPMG interview stage typically consists of several rounds, depending on the location and specific role. These interviews are usually conducted in person or through video conferencing. However, regardless of interview formats, two types are always included in the KPMG interview stage: the case interview and the behavioral interview.

Case interview: often lasts 30-45 minutes, assessing a candidate’s ability to analyze and solve business problems.

Behavioral interview: often lasts 30-45 minutes, assessing a candidate’s experience, competencies, motivations, and personality fit.

What does KPMG look for in candidates?

During the KPMG case interviews, candidates should be able to demonstrate traits that align with KPMG's five values : Integrity, Excellence, Courage, Together, For Better. 

Integrity : Make decisions based on goodwill

Excellence : Keep learning and improving

Courage : Think and act decisively

Together : Respect and be ready to help each other

For Better : Do meaningful acts

KPMG case interview format is candidate-led

KPMG case interviews are candidate-led, where you are expected to take the lead. Specifically, candidates need to develop their own approaches to break down issues, identify the root causes, and gather data from the interviewer to test their hypotheses. 

Candidate-led cases focus less on being right

The primary goal of candidate-led cases is to examine HOW you solve problems rather than getting a specific solution. In candidate-led case interviews, you are asked to break down the problem independently, with little help from the interviewer. As a result, a higher margin of error is acceptable, unlike interviewer-led ones, where you are effectively guided through the process.

Candidate-led cases focus on one big problem

A candidate-led case interview involves solving a problem entirely rather than relying on breakdown questions like an interview-led case. To solve one big problem, you need to apply the top-down approach, which means breaking it down into smaller parts and tackling each. This is a regular consultant task, showcasing your organized and structured manner.

Candidate-led cases are flexible

In candidate-led case interviews, candidates can explore the case with their own strategy. The interviewer usually has a “universe” of information about the client and their problem, which the candidate can freely use to research. Additionally, the interviewer can “make up” new data to support your ideas if you develop new solutions and approaches.

To ace the candidate-led case interview, you need to understand the fundamentals of a candidate-led case. Our Case Interview End-to-End Secrets Program features countless instant-result tips and techniques for case interviews to help you maximize your performance!

After learning the tips and some sample cases, you will need exclusive feedback. Book a meeting with our coaches at MConsultingPrep now! Those ex-consultants will help you practice specific candidate-led case interviews, give you the most detailed and concrete feedback, and suggest the most suitable improvement methods. 

Fundamental frameworks for KPMG case interview

To solve the KPMG case interview, you need to develop an issue tree to break down your case. To create a suitable issue tree, you can use five common frameworks for case interviews: Profitability framework, Business situation framework, McKinsey M&A framework, 4P/7P marketing mix, and Porter’s five forces model. 

To further enhance your case interview performance, you can also apply five effective tools (or mini-frameworks): External vs Internal, Quantitative vs Qualitative, Costs vs Benefits, 2x2 Matrix, and SWOT analysis. 

Five common frameworks for case interview

Profitability framework is mostly used to mathematically break down problems before switching to the qualitative framework for solutions. To use the profitability framework, candidates will split profits into revenues and costs.

Business situation framework is used to analyze a company situation in four area - Company, Competitor, Customer, Products (3C-1P). This 3C-1P framework is flexible for many purposes, however it may be too generic and need customization depending on the situations. 

McKinsey M&A framework is used to assess a proposed merger and/or acquisition on three aspects: standalone values of each involved company, their synergy, and other factors. This framework is MECE and promotes customizations, and is one of the best M&A frameworks. 

4P/7P marketing mix in marketing for tangible work analyzes the 4P - Product, Price, Place and Promotion; while in service marketing three other Ps will be added in - People, Process, and Physical evidence. This framework focuses on the marketing aspect, hence unsuitable for multi-function strategies. 

Porter’s five forces model analyzes the industry surrounding a business in five aspects - Suppliers, Customers, Competitors, New entrants, and Substitutes. This framework is used to get an industry overview and understand the client’s context.

Five effective tools for case interview

External vs Internal method is quick and easy to segment information about a particular entity. The internal branch concern what is inside or intrinsic of the said entity, and the external branch concerns the outside factors. 

Qualitative vs Quantitative mini-framework is used for evaluations. Dividing items into two MECE groups reduces confusion and minimizes the risk of missing an essential item. 

Cost vs Benefit in the decision-making process is very straightforward - if the benefits of an option outweigh its costs, that option can be chosen.

2x2 Matrix is a decision-making tool where options are examined using two criteria, each of which forms an axis of the matrix. 

SWOT analysis mini-framework is seldom used in case interviews for being too generic. However, it can be used for a quick and easy evaluation of a company’s positioning within the industry context. 

To have a deeper understanding of the common framework used in the case interview, you can check our free article on Case Interview Framework .

How to prepare for the KPMG case interview?

You can follow our five-step preparation to prepare for the KPMG case interview.

Step 1: Familiarize with candidate-led case examples

To become familiar with KPMG candidate-led case interviews, you can look at some official examples on KPMG’s website.

Case study 1

Case study 2

Case study 3

You can also try out practice cases from other prestigious consulting firms like BCG or Bain . 

However, consulting companies only provide a minimal number of sample cases for your reference. Check out our Case Interview End-to-End Secrets Program , where you can find standardized exercises and deep-dive guides to ace any case, not just ones from KPMG!

Step 2: Practice consulting math

Consultants require math skills to handle massive amounts of quantitative data. Some tried-and-true math practice tips are:

Use Your Head: Do all your daily calculations mentally unless an EXACT answer is required.

Flatten the Learning Curve: At the beginning, a piece of scratch paper and a 5% margin of error may help; once you feel confident, throw the paper away and reduce the margin.

Establish a Routine: Allocate some time for daily practice. This may seem hard at first, but you can feel the improvement once you’ve overcome the inertia.

Step 3: Develop business intuition

Case interviews are easier to pass if you have good business sense. Getting better at business intuition takes time, so start early, practice every day, and be patient. Step by step, these business insights will begin to feel natural to you. You can improve your business sense in two ways:

Written Sources: I suggest reading business papers daily; you can also visit McKinsey, Bain, and BCG websites for their excellent articles. Beware though – it’s not the pages you read that count, but the insights you draw from them.

First-hand Experience and Observations: Don’t just come to your workplace to work; examine what senior managers are doing – what’s the rationale for their decision, and how has it impacted the organization?

Step 4: Learn the fundamentals and frameworks

To excel at case interviews, you’ll need a solid understanding of the fundamentals and structured approaches. Case interview fundamentals such as hypotheses , MECE , issue tree , and other frameworks are the backbone of any case, so try to master their application in case interviews.

Read more on our comprehensive Case Interview Guidebook to familiarize yourself with crucial terminologies, concepts, and problem-solving fundamentals.

Step 5: Perform mock interviews

The best strategy to prepare for a case interview is to practice as many mock cases as possible. During your practice, take time to study and review your cases thoroughly so that you can identify your areas of improvement and develop specific approaches for each question type.

The video below provides examples of candidate-led case interviews, the format used in the KPMG hiring process. This video also includes step-by-step instructions to help you understand this case type deeply:

Nine tips for the perfect KPMG case interview

Tip #1: understand the procedure of a candidate-led case interview.

There is a five-step procedure to approach the KPMG candidate-led case interview. 

Taking the case: You need to take notes on all information regarding the clients and the case situation. Keep your notes organized to refer back to them easier.

Clarifying: You will have time to gain more information and/or clarify the points you haven’t fully understood about the cases.

Structuring: You will need to break down the case business problem into smaller components to create the issue tree , allowing you to solve it in an effective and cohesive manner.

Hypothesizing: You must develop the hypothesis based on evidence and available data about the problems and find the root cause. If the initial hypothesis in a branch of the issue tree no longer makes sense, go to the next branch. If the hypothesis matches, stick to it to find the root causes and solutions.

Pitching: The pitch is your case interview's final product, where you summarize all findings and recommendations to solve the case. You need to deliver the pitch in a structured, top-down manner.

Tip #2: Have a perfect case opening

There are four reasons to make a good case opening while you deliver your case interview:

First, it shows you have complete control of the upcoming problem-solving process, which is critical in candidate-led cases.

Second, you can demonstrate your whole leadership and relationships with proactiveness - aligning yourself with KPMG’s qualities mentioned above.

Third, a good case opening creates a great first impression. Consultants are expected to perfect everything from the beginning to the end, so this could make a good head start for a 30-minute interview.

Finally, this is an opportunity to align during the interview. After the interviewer has outlined the case details, explain the case to the interviewer in your own words to ensure you grasp the issue and align with the interviewer.

Watch more: How to open a case perfectly?

Tip #3: Map your next moves

Pause occasionally to summarize where you are and where you’re going next. It gives you a sense of direction and authority; additionally, you get plus points in the interview for an organized approach. 

This also gives your interviewer a chance to help you with your mistake. If your interviewer gives you advice, take it – assume it’s intended to be helpful.

Tip #4: Be consistent with your intended hypotheses

Always speak with the current hypothesis in mind, and that hypothesis must be in the issue tree. The sole purpose of the hypothesis-driven approach is to have your efforts and problem-solving steps guided and structured. 

Therefore, to avoid being overwhelmed by piles of data in your case interview, do a sanity check by returning to your issue tree. If your action does not correspond to your present place on it, go back immediately!

Tip #5: Deliver your pitch in one structured manner

This is the most important tip because you need to show that you own the consultant qualities - being structured and straight to the point. Present your analyses in a perfect, insightful, top-down, concise, and captivating final pitch.

Find a way to structure the problem; this will guide your discussion with the interviewer. Briefly explain the framework you plan to use, allowing the interviewer to comment. In general, the simpler the framework, the better. Once the interviewer endorses your framework, stick to it.

To structure your speech:

Begin with a summary line that states the key takeaway/intention.

Separate what you want to say into distinct sections. As much as possible, avoid jumping back and forth between items.

Number your items so you and your interviewer can keep track of them. It's even better to specify how many things you'll be discussing beforehand.

Make your recommendation based on the conclusions you reached from your discussion, even if you are unsure with so little data and time to discuss all the issues.

Tip #6: Make a personalized script

Make a script of what you will say and rehearse it a hundred times. Practice all of the formulaic phrases, such as the opening or data request. With enough practice, those lines will become second nature to you.

The secret to seeming professional in a case interview is to talk in a systematic and formal manner. Using scripts also saves brainpower, which you will undoubtedly want in case interviews.

Tip #7: Keep your notes organized

Neat note-taking greatly assists with your train of thought, making storing and organizing information easier. You're also demonstrating to the interviewer that you're well-organized and meticulous.

Divide your notes into three categories to make them easier to read and interpret: data, presentation, and scratch paper. When the interview begins, take three pieces of paper and name them appropriately. Here is the content that should be on each type of note:

Datasheet: note down and process any data the interviewer gives you and your calculations.

Presentation sheets: draft things you’ll say to the interviewer.

Scratch paper: anything else you need to write, such as brainstorming ideas.

Tip #8: Avoid long pauses

Take a minute to think; don't be afraid of the silence. If you need silence to think, ask for a timeout or announce think-out-loud mode. However, taking it too long will backfire, especially if you can’t come up with something worthy of the long wait. Use the pause prudently, and always try to think as fast as possible while still being “correct”. 

Tip #9: Find and ask for more insights

Try your best to be in-depth and comprehensive with your analysis. Always ask yourself, “Am I overlooking something?” and “Can I drill down further?”. 

This is also helpful when you are stuck in your analysis. You can try asking for insights from the interviewer (remember to state your purpose clearly) like this:

If you have a piece of data and don’t know what to make of it, ask for benchmarks to put the data into perspective.

If you are unsure which framework to employ, consider "segmentation" - look at how the customer or the industry often segments that item. If you need to know how they do it, ask the interviewer.

When you cannot see the problems in the case (probably resulting from the “MECE” of your issue tree), ask the interviewer nicely for a way out.

However, remember to manage your time well. If you take too long, the interviewer might force you to move on, and you will lose the time to solve the case holistically.

Find a former consultant to support your practice; they've been through numerous case interviews, so they understand what's expected of a candidate. Our experts from prestigious consulting firms will give detailed feedback on your performance, a personalized study plan, and reliablxe training resources for case interviews. Book a coach right now to make practicing easier!

Want to explore more candidate-led case examples? Sign up now for our Case Interview End-to-End Secrets Program and discover reliable, standardized mock cases along with detailed instructions. In this program, you also have a chance to get instant-result tips as well as a complete study plan to ace KPMG case interviews.

Scoring in the McKinsey PSG/Digital Assessment

The scoring mechanism in the McKinsey Digital Assessment

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Case interview is the last round of EY hiring process with 3 phases: application, online tests and interviews. EY case interview lasts 30 - 45 minutes in total

PwC case interview is the last round of the hiring process. To get to this round, you must pass the previous 3 rounds: resume, online test & video interview

Case interview is the last round of Deloitte hiring process with 3 phases: application, online tests & interviews. The whole process can take up to 2-3 months

How to Prepare for a Case Interview at the Big 4 Firms

If you are applying for a role within management consulting for one of the Big 4; Deloitte, EY, KPMG or PwC, you may be asked to undertake a case interview. A case interview is a type of job interview in which you will be presented with a specific business situation, and asked to answer questions on how you would handle this specific situation. It may be a situation you are likely to encounter in your day to day job or it could be a question unrelated to your role. For example, you may be asked how you would determine the market for a new product launch, and you’d need to be able to ask questions and extract information to be able to determine this. Case interviews can be complex, but it is important to take a deep breath and think things through carefully before you start.

Interviewer Expectations

A case interview may be different to what you’ve done before, and as such, it can be difficult to know exactly what is expected of you from the interviewers. The good news is that there isn’t really a right or wrong answer to the question, the interviewer is looking to see how you reach your solution. This includes the questions you ask and the logic you use. They are looking for you to ask questions which will help you reach a solution and to carefully consider the information you have to reach a final conclusion.

Case Interview Topics

As you are being interviewed for a management consulting role, there are general case interview topics which will usually be used by most organisations. These include:

Business Analysis – the question may be related to your ability to analyse a specific business. This may include understanding its market potential, profitability, growth etc. For instance, you may be asked whether the company should start exporting to a specific country. In this case, you would need to determine the cost, and calculate the profitability to reach a conclusion. This type of question would come down to your ability to ask the right questions, to make calculations and to problem solve.

Estimations – it is not always easy to know the answer in business. For example, you might be asked to estimate the company profits over the next 5 years’. In this case, the interviewer is looking for your ability to extract information, calculate, problem solve and reach a conclusion, without having hard facts on hand. There is no way of knowing exactly what you will be asked during the case interview, but by looking up business case studies, you’ll get a good idea of how to work out the answer. It’s more about structure and problem solving, than anything else. If you can reach a strong conclusion, all the better.

How Do You Succeed in Case Interviews?

Case interviews, especially with one of the Big 4; Deloitte, KPMG, EY or PwC can be challenging, but there are some steps you can take to prepare for these. Practice

Like most things in life, practice makes better and by understanding exactly what is expected of you, you’ll be in a better position to be able to answer the questions. Reading cases and practicing online case study tests will help you get prepared for the interview. If you can get a buddy to help you practice, this will also benefit you. Ask for feedback from a friend, as this will give you a better understanding of what you’re doing right and what you need to work on. If you can’t find a buddy, practice by reading the cases aloud. The key to success with the case interviews is preparation and practice. It is also a good idea to practice calculations too, as this may be part of the process during case interviews. You may need to work out numbers and it’s important to have an understanding of how to work these out, especially when you’re on the spot.

Confirm the question

Make sure you completely understand the question before you start, as if not, you may go down the completely wrong track with your calculations and answer. The interviewers will not be concerned if you need clarification of the question. They would much rather that you communicate with them and ensure you understand everything before you start. This approach is the one they’d expect you to take with a client, so don’t feel like you’ll mess it up by asking for reassurance.

Slow and steady

Candidates often think that they shouldn’t take their time when it comes to interviews, and rushing through them usually ends with making mistakes. There’s no need to rush through the case interview, it is much better if you take your time and carefully consider the question. If you rush, you are more likely to make mistakes. If you go slowly and carefully, you will make better progress with the interview. If you don’t understand anything at any point, just ask for clarification.

Ask questions

The interviewer will start by giving you details about the case. They will then usually ask if you have questions – always say ‘yes’ to this. This is your only chance to obtain as much information as you need to be able to answer with clarity. Make sure you understand what the situation and problem is. If anything is unclear, ask for clarification. If you show you are genuinely interested in the case, you will come across well to the interviewer. Think about it more in real terms than just trying to pass your interview, and ensure your listening skills are as good as your verbal communication skills. The interviewer will be expecting you to ask questions to be able to reach your conclusion. Don’t worry about asking questions, the interviewer will be more concerned if you don’t ask anything.

Engage with the interviewer

Try and think about the case interview as a conversation between two people. Use positive language and try to build rapport with the interviewer. The more you engage with the interviewer, the more likely they will be to give you additional information and maybe even some clues. In the Big 4 organisation; Deloitte, PwC, KPMG and EY, you will be expected to be able to engage well with a wide range of different people. It is important that this comes across during the interview.

Follow a Structure

In order to deal with a case correctly, it is a good idea to follow a structure. The interviewer will be looking for you to follow a logical process and to figure out your answer from this structure, not just ‘winging it’ to get a result. It will also make it much easier for you to reach a conclusion. For example, if you were asked how to determine the market for a product. You might start by defining the characteristics of the product and asking related questions to break down the answer into components. This will make it easier for you to draw a conclusion. If you get to the end and you decide that the answer isn’t right or you need more information, you will still have a basic format to work with, rather than having to start from the beginning again. Even with case interviews for the Big 4; EY, PwC, Deloitte and KMPG, the interviewers are not specifically looking for a ‘right’ answer, they are looking to understand how you reach your conclusion. This is often more important than the answer itself.

What are interviewers looking for?

The case study interview is firstly, about your ability to communicate – both listening, speaking and writing. The interviewer is looking for your ability to engage and extract the right information. Don’t just ask questions for the sake of it, ask questions which will help with problem solving and reaching a conclusion. The interviewer is also looking to see a desire and motivation to problem solve. For example, establishing the most relevant information, connecting facts together with evidence to reach a conclusion. They will want to see that you are questioning yourself and A strong structure will also be important to the interviewer and your ability to make calculations. It is highly likely that your case study will include problem solving and numerical abilities, as ultimately, business success comes down to profit and loss.

The Structure

A good way to create a structure for the case interview is to look at the problem or the question you are trying to answer. This is the first part of the building blocks. An issue tree can be a good way to break your problem down to sub-problems, in order to reach your conclusion. For example, should we sell our product in China? This can be further divided into what the product is, what the market is for the product, what the demographics are in China, what the cost would be etc. The structure is about dividing each issue into further issues until you reach a final conclusion. Then you should make recommendations based on this. It might not just be one straightforward answer, you may have many different recommendations based on your studies.

Findings from NSW parliamentary report recommend big four accounting firms pay more tax

Analysis Findings from NSW parliamentary report recommend big four accounting firms pay more tax

After a year of scandals, bad publicity and a carousel of parliamentary inquiries shining a light on the shadowy world of the big four global accounting firms, it's time for reform.

State and federal governments fork out more than $1 billion a year on auditing and consulting services delivered by the big four — EY, KPMG, Deloitte and PwC.

Yet the structure of these high priests of commerce enables them to shirk more than $100 million a year in tax.

A NSW parliamentary report tabled on Wednesday described the big four as "pseudo-corporations" that should be taxed accordingly.

The NSW inquiry, chaired by Greens MP Abigail Boyd, released a series of hard-hitting recommendations that included requiring the large consulting firms to pay payroll tax on partnership earnings.

Boyd, who chaired the inquiry, estimates that if adopted the recommendations would add between $50 million and $60 million per year in payroll tax to NSW coffers alone — equivalent to more than $200 million over four years. She told parliament the figures had been validated by external accountants.

If the other states follow suit, such tax changes would add up to a significant amount of money that could be used to help fix the public housing crisis or boost a long list of other areas crying out for funds.

"We … recommend that the NSW Treasurer [Daniel Mookhey] advocate to federal counterparts that consulting firms not be excluded from paying company tax. We also recommend that the NSW government introduce legislation to amend the Payroll Tax Act 2007 to require large consulting firms to pay payroll tax on partnership earnings," the parliamentary report says.

It's a move the industry will fight hard to stop.

Is lack of competition the problem?

A federal inquiry is set to release a second report into the big four on June 12 , with expectations it will also address the lack of accountability, regulation and conflicts as well as a partnership structure that allows these multi-billion-dollar leviathans to minimise tax.

Labor Senator Deborah O'Neill, who has led the charge in the federal inquiries into the big four, said in reference to the NSW inquiry and the ongoing work of the senate, said what's important is how the public sector has been a weakening of the public sector. 

"What we've seen through these inquiries, both in the Senate, and now at the state level, is the way that there has been a hollowing out of capacity in the public service through the use of these firms," she said.

"The scrutiny we have been able to apply, and the response of the Albanese government, means going to a consulting firm is no longer the default for government agencies.

"There is still a role for consulting, where it is in the public interest and can be justified." 

O'Neill added that the committee's work was focused on ensuring the ethical framework and accountability measures were there to make sure it stacked up for taxpayers.

Against this backdrop, the federal Treasury released a consultation paper last month with submissions to close on June 28.

The consultation paper examines the big four's structure, the adequacy of governance requirements for large partnerships, the adequacy of current professional standards, regulations and laws — including those relating to independence and the management of conflicts of interest —and the protection of whistleblowers, given a partnership is not a "regulated entity" for the purposes of the whistleblower laws in the Corporations Act.

Treasury is also looking at the lack of competition given the dominance of the big four across ASX-listed companies. To put it into context, in 2022 Deloitte, EY, KPMG and PwC audited 96.5 per cent of the top 200 ASX-listed companies.

But as Treasury warns: "Market concentration reduces choice for directors and shareholders, weakens resilience of the audit sector and creates risks to the supply of high-quality audit services in case of adverse events (such as firm collapses)."

Things have unravelled before

The PwC tax leaks scandal, which involved PwC partners leaking secret government tax plans to help their private clients such as Google, avoid a law they had helped write, exposed serious deficiencies in how the big four are regulated and the power they wield.

Over the course of the year the spotlight turned to the other big four including KPMG and its role in advising a rail corporation set up by the former NSW government to artificially inflate the state budget by billions of dollars.

The conflicts were first exposed by former KPMG partner Brendan Lyon, who joined KPMG in 2018 and advised on the state rail entity known as the Transport Asset Holding Entity (TAHE), which owns significant assets in NSW, including railway tracks, trains, stations, and extensive land holdings including retail spaces.

Things unravelled when Lyon's report concluded that TAHE didn't work, exposed the system to safety issues, and would leave the state budget $10 billion worse off than Treasury had claimed.

After Treasury officials failed to get him to change his report, which was highly critical of TAHE, a second report was commissioned, this time with another KPMG partner, who argued the opposite, that TAHE would have no impact on the budget.

The scandal spilled into the public arena on June 2, 2021, and triggered a series of inquiries.

Lyon was constructively dismissed.

But his report would later be vindicated by NSW auditor-general Margaret Crawford who refused to sign off the state's accounts until they were amended.

Indeed, the former auditor-general, Tony Harris, described TAHE as a vehicle of deception and a sham.

"It's a financial mirage because you are seeing something that isn't there," Harris said at the time. "It was designed to avert the prospect of the state losing its AAA credit rating by creating an apparent surplus through an accounting gimmick."

More recently the Minns government introduced legislation to shut down the sham and bring it back as a non-profit public asset.

Strength of the public sector at risk

Abigail Boyd's inquiry and the May 29 report say the TAHE case study illustrates the damage that can be done when conflicts of interest are not appropriately managed and integrity walls collapse.

"KPMG has since accepted that it made a number of mistakes by failing to appropriately manage the conflicts of interest that existed in relation to TAHE," the report says.

KPMG said it learned from the mistakes and now used "rigorous" engagement assessment and client assessment processes to manage conflicts of interest.

But the report says the consequences for KPMG have been rather limited other than reputational damage.

"KPMG was not required to pay back the amount it received for the work on TAHE," the report says.

KPMG has continued to be engaged for government work.

But whistleblower Brendan Lyon paid a high price for exposing the flaws in TAHE's operating model.

He was bullied, humiliated and eventually lost his job. According to the parliamentary report, he spent at least $2 million in costs adnd earnings trying to defend his position.

An email sent by Lyon to KPMG partners on October 10, 2020, describes the extent of the bullying: "I have been bullied and discredited by certain partners of the firm for almost a year now – without anyone doing anything much about it … while [working on TAHE] … [my team] has been charging the trenches, but we are still full of KPMG-shaped bullet holes in our backs – and it needs to be stopped once and for all …"

The parliamentary report cites other examples of conflicts, and questionable ethical and corporate practices. And in her introduction to the report, Boyd describes the big four's "insidious and creeping expansion" into the public service had not only drained it of agency motivation and experience but it had threatened the integrity of government decision-making.

"This creeping influence has resulted in a weakened public sector" and it would take time to rectify the degradation of public sector capacity. "This work must begin now," Boyd says in the report.

The inquiry's recommendations, if implemented, would have a profound impact on the way the big four do business.

For instance, one of the recommendations is that the NSW Procurement Board (which sets procurement policies and has the statutory power to issue board directions to government agencies on procuring goods and services) ban consulting firms from providing consulting work to government in areas where it also acts as an auditor, has an ongoing client in that area or has worked in the previous 12 months in any capacity for a private sector client that could be affected by the results of the work being undertaken for the government.

Given the extent of its audit clients in the ASX Top 200, along with superannuation clients, if this recommendation was accepted it would effectively stop the big four from doing consulting work for the NSW government. (PwC no longer does work for the NSW government following the tax leaks scandal.)

For people like Lyon, the fear is the end of the inquiries will mean the end of public visibility of the problem.

"The recommendations of the inquiry are sound, but there has been little palpable appetite by the NSW or federal governments to change laws and regulations and enforce penalties for existing wrongs," Lyon told the ABC after reading the report.

He hopes that changes. If not, it will be business as usual.

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A case study on the electrical energy audit in a residential house at Batam city of Indonesia

• Rozi, Melda
• Saputra, Dendi Adi
• Pratoto, Adjar
• Havendri, Adly
• Rinaldi, Irwan

Lowering Covid-19 cases globally and nationally provides a positive indication of economic growth, especially in Batam City, Indonesia. This condition is also followed by increased electrical energy consumption, particularly in residential houses. This paper presents an electrical energy audit process of a residential house using the IKE (Energy Consumption Intensity) parameter. The audit was conducted in a home with a building area of 226 m 2 and an electrical capacity of 4400 VA. The result shows that the total electricity consumption of such a house is 1,266.34 kWh per month, to which the air-conditioning system contributed the most prominent electricity consumption of the whole facilities in the house. Providentially, the score of IKE is less than 8.5, which means such a residential house is categorized as very efficient energy consumption. Furthermore, the self-evaluating checklist technique has carried out to find the main factor that affects the electricity consumption of the air-conditioning system. Regarding the highest rating score on the self-evaluating checklist of air conditioning systems, the ceiling has a score of 77.5%. This result means that the ceiling needs to be evaluated to reduce the heat load of the house, which in turn reduces the electrical energy consumption of the air conditioning system. Finally, this work can use as an initial audit framework for assessing electrical energy consumption in residential houses in Indonesia.

• INNOVATION IN MECHANICAL AND THERMAL SYSTEMS