Deloitte was caught using AI in $290,000 report to help the Australian government crack down on welfare after a researcher flagged hallucinations

The report was originally published on the Australian government’s Department of Employment and Workplace Relations website in July. A revised version was quietly published on Friday after Sydney University researcher of health and welfare law Chris Rudge said he alerted media outlets that the report was “full of fabricated references.”

Deloitte reviewed the 237-page report and “confirmed some footnotes and references were incorrect,” the department said in a statement Tuesday.

Deloitte did not immediately respond to Fortune’s request for comment.

The revised version of the report includes a disclosure that a generative AI language system, Azure OpenAI, was used in its creation. It also removes the fabricated quotes attributed to a federal court judge and references to nonexistent reports attributed to law and software engineering experts. Deloitte noted in a “Report Update” section that the updated version, dated September 26, replaced the report published in July. 

“The updates made in no way impact or affect the substantive content, findings and recommendations in the report,” Deloitte wrote.

In late August the Australian Financial Review first reported that the document contained multiple errors, citing Rudge as the researcher who identified the apparent AI-generated inaccuracies. 

Rudge discovered the report’s mistakes when he read a portion incorrectly stating Lisa Burton Crawford, a Sydney University professor of public and constitutional law, had authored a non-existent book with a title outside her field of expertise.

“I instantaneously knew it was either hallucinated by AI or the world’s best kept secret because I’d never heard of the book and it sounded preposterous,” Rudge told The Associated Press on Tuesday. 

The Big Four consulting firms and global management firms such as McKinsey have invested hundreds of millions of dollars into AI initiatives to develop proprietary models and increase efficiency. In September, Deloitte said it would invest $3 billion in generative AI development through fiscal year 2030. 

Anthropic also announced a Deloitte partnership on Monday that includes making Claude available to more than 470,000 Deloitte professionals.

In June, the UK Financial Reporting Council, an accountancy regulator, warned that the Big Four firms were failing to monitor how AI and automated technologies affected the quality of their audits. 

Though the firm will refund its last payment installment to the Australian government, Senator Barbara Pocock, the Australian Greens party’s spokesperson on the public sector, said Deloitte should refund the entire $290,000.

Deloitte “misused AI and used it very inappropriately: misquoted a judge, used references that are non-existent,” Pocock told Australian Broadcasting Corp. “I mean, the kinds of things that a first-year university student would be in deep trouble for.”“The matter has been resolved directly with the client,” a spokesperson from Deloitte Australia told TheAssociated Press.