Associated Incidents
More than two dozen KPMG Australia personnel have used artificial intelligence to cheat on internal exams since July, including a partner who will be fined more than $10,000 for using the technology in a training course about AI.
The big four accounting firm has upgraded its processes to detect AI cheating after putting in place policies and extra policing to tackle widespread cheating on internal tests between 2016 and 2020.
The firm will break out cases of AI-related cheating when it reports its annual results -- a move that that goes beyond its existing extensive disclosures and would set a new transparency benchmark in the industry.
KPMG will also check that personnel fulfil their obligation to self-report misconduct to their relevant professional bodies. Both moves will put pressure on the firm's big four rivals to follow suit.
The 28 cases of AI-related exam cheating this financial year highlight the tricky issue of acceptable behaviour when it comes to using the technology to assist in training and education, a problem also facing companies, schools and universities around the world.
The cases come as KPMG derives a growing part of its $US40 billion ($57 billion) in global revenue from AI advice and follows Deloitte Australia having to refund the government over AI-created errors in a report last year.
"Like most organisations, we have been grappling with the role and use of AI as it relates to internal training and testing. It's a very hard thing to get on top of given how quickly society has embraced it," KPMG Australia chief executive Andrew Yates told The Australian Financial Review.
"As soon as we introduced monitoring for AI in internal testing in 2024, we found instances of people using AI outside our policy. We followed with a significant firm-wide education campaign and have continued to introduce new technologies to block access to AI during testing."
The partner, a registered company auditor, completed AI training in July. The training material recommended they download a reference manual related to the training as part of the course. The individual violated the firm's policies by uploading the reference document into an AI tool to answer an exam question.
The firm's internal tools picked up the activity in August. An internal investigation determined the partner should be fined more than $10,000 of future income. The partner also self-reported to Chartered Accountants ANZ which has an ongoing investigation into the case. The remaining 27 cases involve staff at or below manager level.
The corporate regulator imposes strict rules on registered company auditors because of how important their work is to safeguarding markets.
Open-book tests
"Our tests are open-book knowledge checks following internal training courses," Yates said. "People are allowed to download training materials to assist with the test. But they are prohibited from uploading those materials into AI tools to assist them do the test."
The firm employs around 10,000 people, has a turnover rate of 20 per cent every year and monitors over 20,000 internal tests a year.
The new incidents follow a December report in the Financial Review's Rear Window column revealing a handful of first-year staff used AI to collude on internal training.
Current regulations of the accounting and auditing sector dictate firms are not obligated to tell ASIC about misconduct such as exam cheating unless there is a disciplinary finding by the relevant professional body. Instead, individuals are expected to self-report misconduct to their relevant professional body.
KPMG maintains it voluntarily informed ASIC as part of its ongoing discussions with the regulator. However, in a response to queries from Greens senator Barbara Pocock, the regulator said KPMG had not "filed with ASIC a report about the instances of auditors cheating using AI" before the December Financial Review report.
That article led to ASIC contacting KPMG and the firm providing information on a voluntary basis including the new detail that a partner had been involved.
In Senate Estimates last week, ASIC commissioner Kate O'Rourke said the matter showed "the limitations associated with the work and the regulatory hooks" that ASIC has over the big four firms.
Pocock is incensed about the new cheating allegations and has called for the regulation around reporting to the corporate regulator to be tightened up.
"This is yet again another example of unethical behaviour being carried out by the big consultancy firms," Pocock said. "Self-reporting unethical behaviour -- what a joke. The current reporting regime isn't just inadequate, it's a joke. We need greater transparency and stronger reporting mechanisms."
Yates said the firm already reminds personnel that have breached rules they have an "obligation to self-notify to any relevant body".
"Now, we are finalising new processes to strengthen our approach and reinforce they need to self-report, and we'll be checking that they have."