THE DISTILLERY: Leighton swap

Jotters ponder the reasons for Leighton Holdings' sudden auditor switch, while one urges caution with Sigma.

Only Leighton Holdings could make headlines for something as mundane as switching auditors. Given the construction giant's difficult history with its owners, Hochtief and Grupo ACS, plus repeated allegations of wrongdoing, there are all sorts of theories surrounding Leighton's move to replace KPMG with its parents' preferred firm, Deloitte – but two in particular cut through. The first, from The Australian Financial Review's Michael Smith, is that it heralds a new beginning for Leighton, while The Australian's John Durie says it resembles something more attuned to an end of independence. Also this morning, The Australian's Tim Boreham says Sigma mightn't be as healthy as you think and The Australian Financial Review's Matthew Stevens hits out at the government for its handling of Rio Tinto's bauxite proposal in Queensland.

But first, The Australian Financial Review’s Chanticleer columnist, Michael Smith, says it's a miracle Leighton's relationship with KPMG lasted as long as it did – nearly two decades – given a string of alleged corporate breaches at home and abroad.

"What this really means is that Grupo ACS is keen to put the mistakes of the past well behind it. Leighton and its parent still have a tough job in front of them to restore confidence in their ability to manage this sprawling company and convince investors its disclosure and accounting practices are in order. Appointing Deloitte will not solve this problem but it’s a step in the right direction."

However, The Australian's John Durie writes that the move is simply designed to underline ACS's control over Leighton.

"KPMG has been the Leighton auditor for over 17 years, which is clearly undesirable from any governance viewpoint. Company boards and, for obvious reasons, audit firms strongly oppose mandatory audit firm rotation, which the US and UK authorities are working toward. In the Leighton case, it's not good governance that has dictated the change in auditor, but ACS's desire to have the one firm do the audit for the entire group."

The Australian's Tim Boreham has a word of caution for those buying into the hype surrounding Sigma's return to health – and dividend payouts.

"...a wee problem remains: while Sigma has been a consummate turnaround story, the broader industry conditions pose challenges for traditional full-line wholesalers: Sigma, Symbion and the listed Australian Pharmaceutical Industries. Canberra continues to tighten the terms of the Pharmaceutical Benefits Scheme, the subsidy mechanism for prescription drugs … At the same time, Canberra has been tardy at approving popular new drugs for PBS coverage… At the retail end Sigma has experienced fresh travails with the Pulse group of pharmacies (a major customer) going bust."

Matthew Stevens, writing in The Australian, details his theory about why the government has imposed tough new requirements for Rio Tinto's proposed bauxite mine in Queensland.

"Tony Burke seems to have, by the kindest interpretation, erred on the side of excessive caution in deciding to tear up the conditional approval of Rio Tinto’s $US1.5 billion South of Embley bauxite mine and the new port that would be its gateway to the world. I mean, if you wanted to get nasty, you could suggest that Burke has indulged in a bit of Greens-sating theatre given the decision to insert the Barrier Reef test on the South of Embley process came at the end of a week-long visit here by a World Heritage mission despatched to assess whether Queensland’s mining boom risked the living icon’s security."

In other company news, The Australian's Richard Gluyas argues Washington H. Soul Pattinson is sitting on a pile of cash large enough to fund a major new deal, and Bryan Frith looks forward to Paperlinx's board contest today – but not nearly as much as the private equity group he believes is waiting to pounce.

Meanwhile, The Age's Malcolm Maiden says the Australian Securities and Investment Commission's "cone of silence" over the Reserve Bank's Securency scandal calls into question the regulator's commitment to transparency, while Michael West takes aim at ASIC's flawed compliance regime.

And finally, The Australian's Jennifer Hewett is disappointed about Bill Shorten's new rules for financial advisors – "a stitched together compromise" designed simply to pass this parliament.

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