Consultants will fight change ‘tooth and nail’ warns Deborah O’Neill, who blew the whistle on KPMG, PwC
Senator Deborah O’Neill, a key figure in both the PwC tax scandal and the KPMG whistleblower scandal, has warned that partners at consultancy giants will fight to protect their interests against major changes proposed to tackle the industry’s cultural problems.
“We saw self-interest develop over professionalism in the partnership structure. We saw a lack of accountability,” he said at a news conference Wednesday announcing proposed changes in an options document.
“This structure has allowed a culture to develop that people will fight tooth and nail to preserve because it is in their financial interest to do so,” he said.
“I think what we’re seeing manifest in the public sphere through the PWC and KPMG issues goes to the culture that needs to be broken down.”
Deputy Treasurer Daniel Mulino said the change could include forcing consulting giants to divest auditing services that are core to their business, potentially reducing the number of permitted partners by more than half (400).
“One of the options we’re looking at is to reduce that number to, say, 400, which would bring it in line with legal professional services. There are also other changes that would give ASIC more powers, more oversight and stronger penalties,” he said.
Auditors play a crucial role in financial markets by signing off on company accounts that investors, including pension giants, then rely on. However, there have been concerns for a long time. risks to their independence when they are part of groups that also sell consulting services to corporate clients.
One of the most radical proposals in the article is to effectively break up the consulting giants; This step is known as “structural separation” and forces them to offer only business advice or supervision.
Mulino insists the government is keeping an open mind when consulting the industry on proposed changes, but O’Neill warned radical change is needed to “disrupt” a rotten culture.
“Cleaning up a few people at the top of what appears to be a deeply unhealthy, unethical culture is not going to cut it, and that’s why these changes that Minister Mulino is announcing today will be very, very important in making sure we have the appropriate cleansing of our financial markets that is essential for the confidence of all Australians,” he said.
PwC Australia acknowledged the option document was issued.
“We are working through the options presented and look forward to participating constructively in discussions that will move our industry forward,” a spokesperson said.
“Our company has undergone a significant transformation in the last few years, and these efforts continue.”
The Center for Public Integrity welcomed the proposals and signaled its intention to advocate for aggressive reforms.
“We have called for, among other things, a full-scale structural split between firms’ audit and non-audit functions as the only way to tackle the many significant integrity issues presented by current regulations. The latest revelations regarding KPMG only add to the already overwhelming evidence that this is what is needed,” said Dr Catherine Williams, the centre’s chief executive.
A Deloitte spokesman said: “We welcome the publication of the option paper by the Treasury and the opportunity to participate constructively in any measures that will strengthen confidence in the profession.”
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Colin Kruger is senior business correspondent for the Sydney Morning Herald and The Age newspapers.Connect via email.
