Conflict-free fee

THIS week’s Evans & Tate annual meeting opened with a sticky question for executive chairman Franklin Tate.

A concerned shareholder reminded the room of several recent corporate collapses and noted the failure of the auditors in so many of these cases.

The shareholder then took the congregation of wine types, investment bankers and a few well-known liquor retailers through Evans & Tate’s annual report, to the bit that disclosed payments to the auditors and other consultants.

The issue to this gentleman was the fact that Evans & Tate’s auditor, KPMG, earned well over twice as much from consulting fees from the wine company over the same year as it was responsible for con-ducting that audit.

While the shareholder did not question the integrity of KPMG, and neither would this columnist, he was pointing out the potential for a conflict of interest that I felt remained largely unexplained by Evans & Tate or KPMG at the meeting.

Neither the wine company nor the auditor could offer more than a vague breakdown what the fees were for.

KPMG has a strong record in the wine industry and, with Evans & Tate on the hunt for acquisitions, it is quite possible they have required the accounting firm to do a bit of due diligence.

The only new fact revealed at the meeting was that KPMG had won the audit on a competitive tender with the cheapest price.

It was the only hiccup for Mr Tate, who was quite a showman and appeared to enjoy reporting on Evans & Tate’s ongoing ability to provide sound marketing plans and deliver profits, particularly in a business where business nous is often swamped by notions of romance.

But it is a fair question to raise in the current climate.

Auditors are an important part of the equation for shareholders, who rely on a third party to view the books to a level which is unlikely to ever be disclosed to the public, for very good reasons such as commercial sensitivity.

In most cases, it certainly would pay to keep such an important component of the accountability process free from any potential conflict.

Ring the bell

THE supercomputer concept has arrived in town, with

all its bells and whistles.

And I can’t help wondering if those are not alarm bells.

Whether it’s $30 million or $100 million, it’s a lot of public money.

And it’s not as if we have not heard a great clamouring for a supercomputer. Perhaps in academic and technological circles it has been on the agenda but the news that emerged late last week has taken many people by surprise.

The big question is whether we need such a device. Perhaps the simplest answer to this is how the concept has been managed to make its way to the highest levels of State Government.

Was it driven by user demand or is this an opportunity that has presented itself before the need was identified?

The Government, of course, is big enough to make a proper decision on this, but it is easy to get wowed by tech heads into spending money on the latest systems, only to find you have ended up with overkill or, worse, something which is ob-solete within a short time.

The key, in this instance, will be the deal that is done – if it does get the go ahead.

Who bears the risk if the asset turns out to be superseded in a few years or if demand for such a device subsides?

All this needs to be deter-mined from the start.

Buying a super computer is not like when the cable TV guy comes calling. There is no seven-day cooling off period when you sign up.