PwC tax leaks scandal inquiry to usher in sweeping changes | The Business | ABC News

Summary

A major shakeup is imminent in the consulting sector, particularly for the Big Four accounting firms, following revelations that PWC partners misused confidential government data for tax benefits. The Australian government is considering structural changes to increase transparency and accountability, such as requiring PWC to disclose names of implicated partners and limiting consultant use in public service. Critics argue that the Big Four operate with impunity under a partnership model that avoids corporate regulations. Calls for stricter oversight, including splitting auditing from consulting functions, are growing amid ongoing investigations into the firms' practices.

Takeaways

• 😀 A major shakeup is coming for the consulting sector due to misuse of confidential government information by senior partners at PwC.
• 😀 PwC has been under scrutiny following revelations of misuse of confidential government data to help multinational clients avoid taxes.
• 😀 A 14-month long inquiry revealed senators clashed with PwC staff over their refusal to disclose the actions of international partners.
• 😀 Labor Senator Deborah O'Neal emphasized the government's intent to overhaul the structure of the Big Four firms to enhance accountability and transparency.
• 😀 Big Four firms operate under a partnership model that is supposed to ensure joint liability, but have faced challenges when confronted by federal Parliament.
• 😀 Key recommendations include PwC revealing the names of partners and personnel who breached confidential information, and reducing the public service's reliance on consultants.
• 😀 The government will publish how much it spends on consultants and set up a committee to review projects worth over $15 million.
• 😀 There is a push for the Big Four to be regulated under a company structure subject to corporate watchdog AIC, ending their liability-free operating model.
• 😀 Former AC boss Alen Fels advocates for a complete split between auditing and consulting functions of Big Four firms to eliminate conflicts of interest.
• 😀 Despite these calls for reform, the federal government is expected to take time in implementing changes, and ongoing investigations may lead to further regulatory adjustments.

Q & A

What triggered the major shakeup in the Big Four accounting firms?

The major shakeup was triggered by revelations that senior partners at PWC misused confidential government information to help multinational clients minimize taxes, leading to significant public and government scrutiny.

What was the focus of the 14-month long inquiry into PWC?

The inquiry focused on the misuse of confidential government information by PWC’s senior partners and the firm's refusal to provide details about the actions of international partners.

What did Senator Deborah O'Neal propose regarding the Big Four firms?

Senator Deborah O'Neal proposed that the government overhaul the structure of the Big Four firms to increase accountability and transparency, including making the firms more liable for their actions.

What was the primary recommendation for PWC in the inquiry?

The primary recommendation was that PWC must come clean and provide the names of partners and personnel involved in breaching confidential government information.

What role did consultants play in the government's recommendations?

The recommendations emphasized minimizing the use of consultants in the public service, ensuring they act in the public interest, and addressing potential conflicts of interest.

How would the recommendations affect government spending on consultants?

The recommendations proposed publishing the amount spent by the government on consultants and establishing a committee to review projects worth $15 million or more.

What issues were raised about the Big Four’s partnership model?

The Big Four's partnership model was criticized for lacking transparency and accountability, as it allowed the firms to operate with limited legal liability, which ultimately enabled unethical practices for financial gain.

What did Brendan Lion, a former KPMG partner, suggest about the Big Four's structure?

Brendan Lion suggested that the Big Four should be brought under a corporate structure regulated by a corporate watchdog to address their liability-free operating model.

What drastic change did Alen Fels propose to address conflicts of interest?

Alen Fels proposed a complete separation between the auditing and consulting functions of the Big Four firms to eliminate conflicts of interest.

What additional inquiries are being conducted concerning the Big Four firms?

In addition to the inquiry into PWC, there is a criminal investigation into a former PWC partner, and several other inquiries that may lead to further recommendations about the governance and structure of the Big Four firms.