Big Four accounting firms face government crackdown over ethical collapse
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The news: Large accounting firms could be banned from providing clients with any services beyond auditing as part of a crackdown on dodgy behaviour among large accounting firms, with Assistant Treasurer Daniel Mulino labelling ethical standards in the industry as “simply not good enough”.
The context: Corporate Australia has been rocked in recent years by a series of scandals involving large accounting firms, including the PwC scandal of 2023, recent allegations that KPMG Australia used information gained from its clients to gain advantage in seeking further business and news this week that two EY staff had accessed Anthony Albanese’s banking details.
With multiple KPMG executives, including chief executive Andrew Yates and chairman Martin Sheppard leaving the company in recent weeks, Mulino released a Treasury discussion paper on Wednesday morning outlining reform proposals also including limiting consulting firms to the delivery of only one strand of consulting work and capping the number of partnerships to 400, as applies in the legal sector.
Mulino told reporters in Canberra: “We need to look at ways in which we might strengthen regulatory arrangements particularly in light of the kinds of appalling behaviour that has been exposed in recent years.”
Labor Senator Deb O’Neill, who heads the parliamentary joint committee on financial services and corporations, welcomed the report as an important step toward cleaning up the sector.
Senator O’Neill said many Australians would be unfamiliar with the activities of big consulting companies.
But the advice of auditors could influence where their superannuation was invested.
It was critical that auditors exposed to important confidential information from their clients should not be allowed to use it to “line their own pockets”.
O’Neill likened the need for confidentiality by auditing firms to an individual’s relationship with their doctor.
“The doctor knows things about you,” she said.
“You have to reveal everything to yourself to the doctor.
“This is what companies have to do when auditors look at a company’s books.”
It was vital that auditors did not use this confidential information for their own enrichment.
Mulino said the Treasury had been working on the paper “for some time”. Treasury would take submissions on the paper but there was no deadline set for the work to be completed.
What they said: Assistant Treasurer Dan Mulino: “I go into this thinking we need to strengthen our arrangements.”
Senator O’Neill: “Whinging won’t cut it. We have to do our job.”
The source: Media conference
