‘Unacceptable’: caps on the cards for consulting firms
Major consultancy firms could be capped and separated from their audit functions due to changes in the industry, as the Prime Minister has described behavior in the industry as completely unacceptable.
KPMG has come under fire after it was revealed that its auditors misused confidential client documents and misled the whistleblower who raised the alarm.
Prime Minister Anthony Albanese said problems in the sector needed to be resolved.
“The behavior of some of these big accounting firms is completely unacceptable… and they need to be held to account,” he told ABC TV on Wednesday.
“They engaged in conduct that was not consistent with Australian law or the way people expected large companies to operate.”
Deputy Finance Daniel Mulino confirmed that the government is considering reducing the number of partners, as well as separating consultancy services from audit functions.
“What we saw… was behavior from big companies that wasn’t good enough,” he told ABC Radio.
“This relates to some of the services that support our entire financial services system, our audit functions, our core accounting and advisory functions, where information, confidential information, is misused across different parts of the firm.”
Allegations that KPMG leaked client information emerged during a parliamentary inquiry into which the firm allegedly misused information from Lendlease to win external audits of Westpac and Dexus.
Labor has published an options paper to improve regulation of Australian accounting, auditing and consulting firms.
These include improving audit oversight, requiring firms to meet quality management and ethical standards, and operational separation of different arms of the business.
Partnership limits may also be imposed for large accounting firms.
“It is time to restore trust and integrity so that government, taxpayers and other businesses can rely on the services of great accounting, auditing and consulting firms,” Mr. Mulino said in a statement.
The federal government was also considering limiting the number of partners in an accounting firm from 1,000 to 400.
“These firms have grown very significantly, and that’s aligned with the current regulatory environments,” Mr. Mulino said.
“This is one of the settings we will look at to see if it needs to be lowered to be more in line with other professional services.”
EY is also facing scrutiny after an employee was one of two people who allegedly accessed the prime minister’s personal banking account while working at the Commonwealth Bank.
The EY employee has since been dismissed.
Mr Albanese said it was appropriate for those individuals to be charged for the alleged breach.
“It’s concerning that anyone, any Australian, has access to their privacy, let alone that a non-Commonwealth Bank contractor could access that information,” he said.
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