Committee holds 'grave concerns' for leadership of PwC

Senator Deborah O'Neill has expressed deep concerns about PwC's past and present leadership in the final report for the Inquiry into the big four accounting and consulting firms.

The Parliamentary Joint Committee on Corporations and Financial Services Committee tabled its final report yesterday, outlining 16 priority recommendations for immediate action and 40 in total.

Within the report, O'Neill said she held "grave concerns" about the leadership of the current PwC Australia chief executive Kevin Burrowes.

"PwC International’s secret side-payment to Mr Burrowes and the firm’s continued refusal to hand over the Linklaters Report and related documents into the foreign PwC network partners involved in the scandal demonstrates a dismissive attitude towards the Australian Parliament and a failure to identify a glaring conflict of interest," said O'Neill.

"It is for these reasons the committee has taken the view that PwC and related entities should be excluded from tendering for government work until the completion of all ongoing investigations, and resolution of outstanding matters still at large in the public sphere."

The PwC network appointed Linklaters in May 2023 to form an independent assessment of what happened in relation to the unacceptable sharing of confidential information by PwC Australia with PwC personnel outside of Australia.

PwC International Limited declined to provide the committee with the report, including on a confidential process, despite several requests from the committee.

The committee has also recommended that government consulting firms be required to publicly declare if and when they are subject to international remediation and reveal the terms involved.

"Australia’s national sovereignty should not ever be compromised by international franchise actions or contracts," said O'Neill.

The Committee noted in its report that it issued several invitations for PwC International Limited (PwCIL) staff to appear as the public hearing so that the committee could inquire further into their role in PwC Australia.

"The committee [also] sought to better understand the relationship between PwC Australia and PwC International Limited by requesting copies of the agreement between PwC and PwCIL and other documents associated with the remediation of the PwC breach of confidentiality obligations," the report said.

"Both PwC and PwCIL declined to provide those documents, citing commercial confidentiality."

The committee said it remains concerned about the lack of transparency regarding Mr Burrowes’ services to PwCIL and the associated remuneration.

"The committee considers that the lack of transparency within PwC Australia about this matter, including not informing partners and staff, fails to set a good example for everyone else in the firm at a time when leaders continue to assert that they are transforming PwC Australia, and must lead by example with the highest degree of integrity," the report said.

"The failure to inform PwC Australia’s Chief Risk and Ethics Leader is a significant failure of process that impedes that person’s role in monitoring risks associated with conflicts of interest."

The report also made a wide range of other significant recommendations, including a cap on the number of partners in accounting partnerships and the operational separation of audit from other services.

Committee chair Deborah O'Neill said the recommendations would "change the shape of the industry and implement evidence-based solutions that have proven successful in other sectors and jurisdictions".

"Such changes will return the focus back to providing objective and independent services and eliminate many of the current inherent conflicts of interest."

The committee has urged the government to reduce the allowable size of partnerships for accountants to a maximum of 400 partners, to align with the limits of legal partnerships. The report recommends implementing the 400 partner cap over a five year period.

It has also called for multi-disciplinary large accounting firms to be prohibited from supplying both audit and non-audit/consultancy services to the same client and their associated entities in both Australia and internationally.

The report has urged the government to introduce new laws that would require large multi-disciplinary accounting firms to implement operational separation of their audit practice from their non-audit practice.

It also wants to see audit, accounting and consulting partnerships with greater than 3,000 staff adopt the Corporations Act 2001 requirements for governance and accountability.

The committee has also recommended that the Australian government legislate to enhance the ASIC's power to take enforcement action against audit firms, not just individuals, including for quality management standards.

It also wants the government to give greater powers to ASIC to oversee audit to cover all partners within multidisciplinary firms regardless of which part of the firm they work in, as required in the UK Financial Reporting Council Audit Firm Governance Code.

It has also urged ASIC to e-establish a program of random audit inspections and to supplement its existing risk-based approach by also reviewing audit files where conflicts of interest arise from the big four firms providing other services to their audit clients.