Deborah O'Neill (NSW, Australian Labor Party) Share this | Hansard source

by leave—I rise to speak to the Corporations and Financial Services Joint Statutory Committee report: Ethics and Professional Accountability: Structural Challenges in the Audit, Assurance and Consultancy Industry, which was presented out of sitting on 7 November this year.

Illuminated on the skyline of major cities across the globe are the alphabet logos of the so-called 'Big Four' accounting and consulting firms, KPMG, Deloitte, EY and PwC. Their colourful banners might catch the eye but most Australians know little of these massively influential entities that are so important to the proper functioning of our financial markets. For those of us who use their services, and that in fact is every working Australian, it is almost impossible to think there was a time when they did not exist. These entities have entrenched themselves as the trusted and independent ethical providers of audit and assurance services who purport to verify the truth and accuracy of financial statements of companies of all sizes. Therefore, it's of paramount importance that there is trust in the auditing services provided by these firms and that their function of providing independent truth is not marred by their own opaqueness.

Given every working Australian has superannuation, we each have a stake in the investment decisions being made on our behalf based on the audited financial statements that inform the decision-making of the superannuation trustees, superannuation holders through SMSFs and in any form of superannuation. The investment is determined on the basis of what these companies say. What EY, Deloitte, PwC and KPMG do has real impact on our lives, particularly for our retirement, and I remind Australians that we have $4 trillion under management. This is no small thing.

The big four are all partnerships. Together they audit 193 of the top 200 companies in Australia. What they do matters. It matters to all of us. In the course of this inquiry, we heard from many former senior members of this profession who understood their centrality to the financial ecosystem. They were deeply proud of that work in previous times, but many of them bemoaned the current state of their profession and speak of an ethical decline and an increase in risk to everyone who relies on the integrity of audit.

Colleagues, the reality we faced when we commenced this inquiry was to have a look at the challenging behaviours that manifested themselves through evidence that we received in the Senate. The final report that we adopted without dissent did have additional comments on a couple of matters that will be probably spoken to by my colleague Senator Barbara Pocock, with regard to the Greens, and Senator Scarr from the Liberal National Party. But the inquiry delivered an essentially unanimous report with 40 recommendations. We held 12 public hearings. We received 83 submissions and we published 196 responses to questions on notice. Those 40 recommendations directly respond to regulatory, cultural and legislative issues raised throughout the course of the inquiry.

On the evening of 15 February 2023, in response to my question to the CEO of the Tax Practitioner Board, Michael O'Neill, it was revealed at the Senate economics committee in estimates that Peter-John Collins, as a partner at PwC, conspired, along with 20 or 30 people—that was the evidence on the night—to monetise confidential Australian government information for the benefit of PwC and its clients. Following this revelation, questions on notice to the Tax Practitioner Board led to the release of 144 pages of internal emails detailing the depths of that deceit and a disturbing cultural failure within the major international accounting and consulting firm. The emails revealed the hidden inner workings, the cultural realities of one of the most important entities in the architecture of the Australian financial sector. The resulting scandal shook corporate Australia to its core as PwC, those three letters, became synonymous with a profoundly disturbing breach of trust.

The public outrage that has ensued has ensured the strength of this largely non-partisan and deeply comprehensive parliamentary response, of which this report is a central component. So egregious and shocking were the PwC revelations that the Albanese government implemented significant legislative change as the Treasurer, the finance minister, the Attorney-General and the Assistant Treasurer introduced immediate reform. But still, as this report indicates, there is much yet to be done.

Concerningly, the committee documented a broad and relentless pursuit of profit at any price with the revelation of practices that jettisoned even the most basic principles of ethics and professional accountability by far too many in this sector. That sort of culture thrives on conflicts of interest, which are frequently ignored, ill-managed or even exploited.

With regard to the structure of these firms, the committee has recommended that the proliferation of partners be recalibrated to match the number of the legal industry and to realign it to a more operable form of joint and severable liability. Further, the make-up of multidisciplinary professional services firms should also be altered with the operational separation of the audit component of the firm to be utilised at the exclusion of other services to the client. These recommendations will change the shape of the industry and implement evidence based solutions that have proven successful in other sectors and jurisdictions. Such changes, as recommended by the committee, will return the focus of these very important entities back to providing objective and independent services and eliminate many of the current and prevailing inherent conflicts of interest. On the regulatory side of the equation, mechanisms to strengthen the standards, liabilities and independence of boards that actively monitor and enforce compliance should be considered by the Australian government. It is also essential to promote healthy competition within audit and consulting sectors. The recommendations of the report have been framed by an explicit intention to protect the viability of smaller entities as we move to an increasingly robust regulatory framework. The committee also recommends increasing the small and medium sized consultancies, particularly those that solely undertake government work as a means of uplifting these businesses and reducing potential conflicts of interest among consultants undertaking government work.

Throughout the course of the inquiry, the committee contended with varying levels of transparency and willingness—or unwillingness, I should say—among large firms with respect to their engagement with the committee. In particular, engagement from PwC's past and present leadership proved to be extremely challenging and highlighted an absence of meaningful commitment to reform. Evidence given verbally or in documents was far too often constructed in compromising half-truths and obfuscation. Far too often, evidence was provided only after protracted delays and resistance to requests from the committee. This behaviour failed to meet the standards required by the parliament and also fell short of public expectation. The inability of the PwC firm's former CEOs, Mr Luke Sayers and Mr Tom Seymour, to robustly describe, evaluate and take sincere accountability for the culture they created is a failure of leadership by any measure. Further, Mr Sayers's and Mr Seymour's relationship with the treatment of the Commonwealth officials of our regulatory bodies, especially the ATO and the Tax Practitioners Board, revealed that same practice of ignoring, avoiding and delaying proper scrutiny that this committee has had to confront and manage. It has to stop. It has to change.

I also hold grave concerns about the leadership of the current PwC Australia CEO, Mr Kevin Burrowes. PwC's international secret side payment to Mr Burrowes of $1.2 million and the firm's continued refusal to hand over a report, known to us as the Linklaters report, and related documents about the foreign PwC partners involved in the Peter-John Collins scandal that emanated from Australia demonstrate a depressive attitude towards the Australian parliament and a failure to identify clear conflicts of interest. It's 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 ongoing investigations and resolution of outstanding matters still at large in the public sphere. We've also recommended that government consulting firms should be required to publicly declare if and when they are subject to international remediation and reveal the terms involved. Australia's sovereignty should never be compromised by an international franchise's need, actions or contracts.

I'm very proud to have chaired this report. I want to thank and acknowledge the work of my colleagues, the deputy chair, the Hon. Alex Hawke MP, Senator Paul Scarr, Senator Barbara Pocock, Senator Louise Pratt, Dr Daniel Mulino MP, the Hon. Luke Howarth, Ms Zaneta Mascarenhas and Mr Steve Georganas, along with their staff and former member of the committee the Hon. Keith Pitt for their very close attention to this inquiry and their regular attendance. This is a body of work that needs sincere and prompt implementation. I also want to thank the Fourth Estate for their continued focus on this matter of national importance.