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When AI gets it wrong: lessons from Deloitte's $440,000 mistake
- gldewhirst
- Oct 15
- 2 min read
Recently, Deloitte made headlines after refunding part of a $440,000 government contract in Australia. The reason? The report they produced - on automation in welfare compliance - contained AI-generated “hallucinations”: fabricated quotes, citations, and references to academic work that didn’t exist.
For one of the world’s leading consulting firms, it was an embarrassing moment and a wake-up call. The story has spread across The Guardian, Financial Times, and AP News, sparking debate about how professional services are using AI - and how clients should hold them accountable.
What went wrong
Deloitte had used generative AI tools when creating parts of its report but failed to properly verify the content before publication.
Errors included:
- False academic citations
- A misattributed legal quote
- Inaccurate or incomplete references
In this case, AI produced convincing but untrue content - and no one caught it before finalising and delivering the report.
The result was a reputational hit, a partial refund, and a stark reminder that AI can’t replace human diligence.
The risk for businesses
This case doesn’t just matter for global consultancies. It matters for any business using AI tools to produce content, reports, or strategy documents.
AI is an incredible tool - it saves time, structures thinking, and improves productivity. Do I use it? Absolutely, I’d be mad not to. However, as we’ve seen in this case, when used without careful due-diligence, AI can undermine credibility and even lead to financial or legal consequences.
What businesses can learn
Demand transparency from consultants
If your external advisors or marketing partners use AI, ask them how. What’s machine-generated? How is it human-checked?
Don’t delegate critical thinking
Whether it’s a business plan, marketing report, or strategic analysis - AI can support, but should never be used without human judgement.
Put AI review processes in place
Introduce a second pair of eyes (internal or external) to validate facts, numbers, and references before publishing or presenting.
Make AI your co-pilot, not your driver
Used well, AI is a fantastic tool that can help businesses do more with less - but only if you keep control of quality and context.
Smarter, not riskier
At Velara Solutions, I help leadership teams navigate strategic development safely - combining human insight, strategic rigour, and the best tools (including AI) to create measurable results.
AI can absolutely enhance your business - but only when it’s managed intelligently, ethically, and transparently.
📞 If you’d like to explore how we can help your business achieve its goals, book your free strategy call today.
