The global consulting firms that dominate Australia’s corporate and government sector could be forced to operationally separate their audit business to avoid conflicts and open up to greater financial scrutiny under proposals recommended by a parliamentary inquiry triggered by the PwC tax scandal.
The report also recommends that these private firms be limited to 400 partners, and that they be prevented from offering both audit and non-audit work – like consulting services – to the same client. This would be a big blow for firms such as PwC which, in 2022, received more than $79 million in fees from Macquarie Group alone.
“This report is the legacy of the PwC tax leaks scandal, and the sector-wide misconduct that was uncovered in the aftermath,” Senator Deborah O’Neill, chair of the parliamentary joint committee on corporations and financial services, said after the report was released.
Committee chair Deborah O’Neill: “This report marks the end of impunity for a sector which has, for far too long, thrived in darkness.”Credit: Alex Ellinghausen
She said the recommendations will reshape the industry with evidence-based solutions that have proven successful elsewhere.
“This report marks the end of impunity for a sector which has, for far too long, thrived in darkness.”
The report recommends that firms with more than 3000 employees should prepare financial accounts and adopt the transparency practices of the corporate clients they work with under the Corporations Act.
Another recommendation is that the government work with the industry to create a code of conduct for consultants – and set up an associated compliance body within government that will register individual practitioners.
“Right now, the consulting sector benefits from deliberate ambiguity. Many consultants across government and the private sector are operating without any safeguards as, unlike lawyers, accountants, electricians, nurses and countless other professions, they do not have any formal qualification requirements or regulatory body,” O’Neill said.
Committee member Senator Barbara Pocock was supportive of the report but said it did not go far enough. She wants further changes, including a ban on political donations by the big firms and a cap on partner numbers reduced to 100. “We need systemic change to ensure that the PwC tax leaks scandal can never happen again,” she said.