It is heartening to know that John Fairfax called in its regular
auditor Ernst & Young and another Big Four firm KPMG to keep an eye
on its circulation practices.

Whilst not wishing to denigrate either outfit, it will be very
interesting to see how they handle potential conflicts coming up when
media ownership laws are deregulated and the big nine become the big
five.

Tim Lester had an excellent story on Business Sunday recently (see part one and part two)
pointing out that Don Argus used National Australia Bank’s audit firm
KPMG to run the numbers on a possible takeover bid for ANZ a few years
back. Problem was that ANZ was also audited by KPMG and no disclosure
was ever made. Talk about a huge conflict of interest and no wonder ANZ was furious.

Fast forward to 2005-06 and how on earth will Ernst & Young handle
merger negotiations given that it audits the following media companies:
News Corporation, PBL, John Fairfax, Village Roadshow, Southern Cross
Broadcasting, Austereo and Prime Television.

PricewaterhouseCoopers is the next biggest player with APN News &
Media, Ten Network, West Australian Newspapers and Sunraysia Television
on it books whilst KPMG only has Seven and Rural Press and Deloitte
doesn’t appear to have a single major Australian media company as audit
clients.

Whatever happens, Ernst & Young are going to have a big role to
play when the media mergers of 2006 roll around but they’ll have to be
extremely careful about who is allowed to participate in any due
diligence processes.

Peter Fray

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Editor-in-chief of Crikey

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