Watchdog 107 (December 2004) included an article by Sue Newberry entitled "Foreign Investment, Financial Reporting And Telecom. Or, The Profitable Mysteries Of Pumping And Dumping". Sue wishes to retract part of it. Ed.

In the December Watchdog I stated that Telecom’s auditor KPMG is also Telecom’s tax adviser and accounting policy adviser. This was incorrect and I apologise for the error. Until 2002, PriceWaterhouseCoopers provided all of these services for Telecom, but after 2002, Telecom adopted the latest in "good governance" practices. It shifted its external audit to KPMG and now prohibits its external auditor from providing a range of financial services. The prohibited services include structured finance advice and tax planning.

All of the major international chartered accounting firms, PWC and KPMG included, have been involved in providing structured finance advice and tax planning services. The US Inland Revenue Service calls some of their products abusive tax avoidance schemes. Along with other dubious accounting transactions, such schemes hit the news in New Zealand in 2002 when Telecom was named as a counter-party to some deals. The driving force behind abusive tax schemes is an attack on the tax base. The schemes are structured to incur large phantom losses in order to gain through the tax system. The major international chartered accounting firms have been criticised in the United States for peddling these schemes through telemarketing. They earn big fees from them.