Limiting the number of partners at the Big Four accounting firms is one option open to the government. Photo: File.
The Big Four accountancy firms – KPMG, Deloitte, PwC and Ernst and Young (EY) – will have to rein in hierarchy numbers and separate their consultancy work from their auditing functions if the Federal Government accepts Treasury options aimed at forcing greater accountability in the sector.
The Greens, however, say the move is just further delaying the need to take decisive action against the firms.
It’s just an options paper at this stage, but it includes some serious measures aimed at improving the conduct of the consultancy giants.
Assistant Treasurer Daniel Mulino released the paper on Wednesday (1 July), saying the government is prepared to act.
“In recent years, we have seen behaviour from some large accounting, auditing and consulting firms in Australia that is not fair and honest,” he said.
“This has undermined trust in the firms themselves and raised broader questions about the resilience of the frameworks meant to uphold market integrity.”
The paper sets out a range of options to strengthen accountability and lift standards across the sectors.
These include dealing with conflicts of interest in multidisciplinary firms with audit and non‑audit functions, including firms advising government on the design of programs and legislation while also advising companies on how best to benefit from them.
Partnership reforms are also on the table, including governance requirements for large audit firms and partnership limits for large accounting firms.
Requiring audit firms to meet quality management and ethical standards to be eligible for engagement by audited entities, and improving audit surveillance are also among the options being considered.
“The behaviour of large firms should have consequences,” Mr Mulino said.
“It is time to return trust and integrity so that the government, taxpayers and other businesses can rely on the services of large accounting, auditing and consulting firms.
“There have been several instances of opportunistic behaviour, of breaches of trust, of confidential information being used in highly inappropriate ways.
“It is clear to me that we need to look at strengthening arrangements.”
The Assistant Treasurer said the options paper builds on government actions already taken to strengthen promoter penalty laws, enhance regulators’ powers, improve government procurement and contracting frameworks, and review laws on tax and corporate whistleblowing.
He hinted that the government is considering slashing the cap on the number of partners in a firm by more than half – from about 1000 to 400.
“These firms have grown very substantially, and that was accommodated by current regulatory settings,” he said.
“That is one of the settings that we will look at, whether that should be brought down to be more in line with other professional services.”
It comes as KPMG is in full damage control over revelations that its auditors misused confidential client documents to win more work and mistreated a whistleblower who first raised concerns about the corrupt behaviour.
KPMG is currently teaching ethics and leadership to Australian Public Service bosses, with the government seemingly happy to let that continue.
PwC is still reeling over its illegal conduct in leaking confidential Treasury information to help its international clients avoid paying new taxes that PwC was actually helping the government to establish.
And the very latest scandal comes via EY, which has had to sack two employees when they allegedly accessed Anthony Albanese’s personal banking data while they were on secondment to the Commonwealth Bank. Charges have been laid.
The Prime Minister described it as a “serious incident” when asked about it on Wednesday (1 July).
“It’s before the courts, and I’m not about to go into the detail of that,” Mr Albanese said.
“It’s appropriate charges have been laid … Accessing anyone’s privacy, any Australian’s privacy, is alarming, let alone someone from a contractor who’s not an employee of the Commonwealth Bank being able to access that information.”
Greens finance and public service spokesperson Barbara Pocock said the options paper is just a stalling tactic and the government needs to stop expressing “deep concern” over the consultancies’ corrupt behaviour and start taking action.
“Labor needs to stop kicking the can down the road,” Senator Pocock said.
“Back in 2024, Labor issued a consultation paper and nothing came of it.
“Submissions were received and nothing came of it. Now we have another paper, and the test for Labor is: will it act or will it tinker?
“What we need is action, and it’s on Labor.
“We know what the solutions are: Labor needs to reform the Big Four and subject these massive partnerships to the same rules of tax, transparency and whistleblowing as other large entities through corporations law, separate the functions of consultancy from audit and regulate and penalise them properly.
“The time for talk is over; now is the time for action.
“Until Labor acts, the Big Four consultancy firms will continue to make a mockery of the parliament.”
Original Article published by Chris Johnson on Region Canberra.
