The royal commission will cover all the high-profile union scandals of the past five years. These include the Health Services Union and the Construction, Forestry, Mining and Engineering Union, which has been accused of links to organised crime. Union election funds controlled by the Transport Workers Union will be examined too.

The first union examined is the AWU, Australia's oldest, one of the more politically influential in the right wing of the Labor Party and Shorten's power base. It claims it has 130,000 members and was until recently run by national secretary Paul Howes.

The royal commission hearings this week covered the AWU slush-fund affair, which has bedevilled the union since the mid 1990s. The scandal became a big story in 2012 when activists uncovered documents and witnesses who connected the prime minister, Julia Gillard, to fraud in the union. Media coverage helped convince the Coalition government to appoint the royal commission.

2. Are union slush funds illegal?

Union slush funds are savings accounts containing private money. They're not illegal or unethical. Usually they are contributed to by union officials from their pay and are used in union elections. What's not legal is union officials being paid for fictitious training or industrial peace as is being suggested in the royal commission.

The fund used in the alleged AWU fraud was run by the AWU Welfare Reform Association, which had no written records of any members. It had no records of any management committee meetings. It paid no tax. It had no accounts. It had no assets. It did not maintain any records at all, except for the documents lodged at its incorporation. They were prepared by Gillard.

3. What happened at the AWU?

There is evidence from the early 1990s that two AWU officials took around $400,000 from building and engineering companies for themselves that should have been for the union. It is possible - and this is the really contentious allegation - that some of the money was used by Gillard to renovate a house in Melbourne.

4. Did Julia Gillard do anything wrong?

The barrister who serves as the royal commission's prosecutor has presented evidence that looks bad for the ex-prime minister. Jeremy Stoljar said that money contributed by employers to the secret AWU slush fund was used to pay for renovations on Gillard's home in Melbourne when she was a lawyer representing the union. A builder, Athol James, told the commission he saw an AWU official accused of corruption, Bruce Wilson, give Gillard cash in her house. Gillard and Wilson were dating. He was also her client.

Wayne Hem, a former AWU official, said he paid $5000 into Gillard's bank account in late 1995 on the orders of Wilson.

The evidence against the former prime minister is not conclusive. There could be innocent explanations. Gillard has said she checked her receipts and believes she paid for all the work on her house.

5. Is this a right-wing plot to damage Gillard, Labor and the unions?

Yes and no. Many of the figures who have driven the story behind the scenes are sympathetic to the Coalition or antagonistic to Labor. Michael Smith, a former 2UE (owned by Fairfax) radio broadcaster who has relentlessly pushed the story and has a right-wing following, would like to see Gillard jailed. "She should be arrested, charged and tried," he told Fairfax Media.

The Abbott government knows negative publicity from the royal commission will hurt the Labor Party and Shorten. Liberal leaders expect it will reduce union membership, which will weaken the Labor Party's finances. On the other hand, there is a strong argument that corruption in the union movement can't be rooted out without dramatic intervention like a royal commission.

State-based anti-corruption commissions have shown no interest in pursuing unions. The Fair Work Commission's investigations were hopeless. Police investigated the AWU slush fund in the 1990s and never charged anyone. They were reluctant to investigate the Health Services Union until shamed by The Sydney Morning Herald and national secretary Kathy Jackson.

Union leaders like Paul Howes and (Transport Workers' Union national secretary) Tony Sheldon have acknowledged the union movement has a problem. Even Shorten proposed giving the federal police more resources to investigate unions.

6. How deeply involved was Bill Shorten?

One of the fascinating revelations this week was in Robert Kernohan's testimony. Shorten was starting out in his union career when he befriended the older man, who was an official at the AWU.

Kernohan told the royal commission he was disgusted at the union's decision to make redundancy payments to Wilson and other official, Ralph Blewett, when they were kicked out over the slush fund. Shorten urged Kernohan to keep quiet, Kernohan claimed, because his selection for a safe Labor seat was at risk. (Shorten denies this.)

After Kernohan complained to the police he was ostracised at work. His office was trashed and he claims he was bashed. He subsequently had a nervous breakdown.

7. What's at stake?

The credibility of the entire labour movement is on the line. If the royal commission can convince Australians that corruption is endemic to unions, it will hasten the decline of organised labour. This would force the Labor Party to find other sources of funding, manpower and leaders.

Labor would probably have two choices: raise more money from politically conscious activists or move closer to business. In crude terms, the death of unions - which may or may not be inevitable - could force Labor to chose between the left and the centre.

The media has an interest in the outcome too. All big outlets which cover politics closely, including Fairfax Media, News Corp Australia and the ABC, are participants in the political fight over union corruption through their reporting.

In a way, their coverage - and non-coverage - of Gillard's involvement in the AWU scandal became a self-defining act.

An adverse finding against Gillard will be used by News Corp to increase its attacks on the ABC's credibility. If Gillard is cleared, the commentators who doubted the story from the start, including ABC radio broadcaster Jon Faine, will likely claim vindication.

Aaron Patrick is the author of Downfall, How the Labor Party Ripped Itself Apart

The Australian Financial Review