Rein in ‘enormous’ big 4 partnerships, small firms urge
CPA Australia and IPA agree that the cap of 1,000 partners should be cut to ensure greater regulation and scrutiny.
Representatives of smaller accounting firms have called on the government to rein in the “enormous” partnership structures used by their counterparts at the top end of town.
CPA Australia and the IPA told a Senate inquiry into consulting services on Friday that the cap on big four partnerships, which currently sits at 1,000 partners, had to be reduced to improve transparency and scrutiny.
CPA Australia CEO Andrew Hunter said the cap of 1,000 was a “very significant” number.
“You’re absolutely right to be questioning that cap,” he told Greens senator Barbara Pocock, who had brought the issue up initially.
“We think partnerships are a legitimate way of conducting business. But we think that that should be reviewed that that is a very significant number, and we would welcome a review.”
IPA CEO Andrew Conway said he “echoed the evidence provided by CPA Australia”.
“Looking at the cap, looking at 1,000 partners, and then in terms of how does a 1,000-plus partnership model actually manage affairs in a transparent way, in an accountable way, is a very good question to be asking,” he said.
He also suggested adopting the model used by UK firms could also lead to greater public accountability.
“I think the committee is going in the right direction in terms of looking at the cap but then importantly also looking in terms of overseas models, particularly in the UK, and additional measures for those partnerships to be publicly accountable, and publish their accounts,” he said.
According to Ms Pocock, this meant the committee and professional bodies were on a “unity ticket across the membership organisations in the accounting profession” on the need to rein in partnerships that had grown “so enormously” in recent years.
“It’s very important evidence for us as a committee that you've stated that large professional firms should be subject to clearer and more comprehensive ASX-level governance standards, including mandating disclosure of partner remuneration and misconduct,” she said.
While accounting partnerships are capped at 1,000 partners, partnerships for other professions like medical practitioners are limited to 50 people, and legal partnerships are capped at 400.
Witnesses previously told the committee during hearings last year that the model, which was outside the scope of the Corporations Act, meant the firms could operate with “absolutely no regulation and almost nothing in terms of financial risk”, enabling misconduct exposed by the PwC tax leaks scandal.
Brendan Lyon, University of Wollongong professor and former KPMG partner, said in July that the big four had been operating as “pseudo corporations” while operating outside of the accountability and transparency obligations subjected to actual corporations.
“It is clear on the evidence that these firms have been able to operate beyond the law, beyond sanction and beyond regulation,” he said.
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