The big four accounting firms could be forced to slash partner numbers and incorporate their consulting businesses under a crackdown on governance standards flagged as a possible response to the PwC tax leaks scandal.
In a consultation paper released late on Friday, Treasury also raised concerns about audit and consulting partners sharing profits, which it said risked auditors being incentivised to prioritise client satisfaction over audit quality, potentially undermining market confidence.
Chris George, EY Oceania public policy leader, welcomed the consultation and said the firm would “formulate an appropriate policy response” that avoided “unintended consequences and unnecessary cost to the economy”. In comparison, law firms are limited to 400 partners, while actuaries, doctors, patent attorneys and stockbrokers are limited to 50 partners.the government’s overriding concern around any potential changes is protecting the quality of three services critical to the wider economy: auditing, taxation and insolvency.
“The consequences of gaining or losing specific clients are shared with the broader firm, which means profit sharing may create incentives for auditors to avoid contentious issues or adopt a less stringent approach. A separate series of proposals released at the same time raised the prospect of the Australian Taxation Office being granted powers to access mobile phone data and stored communications, similar to powers held by police.The crackdown on governance standards among the big four comes as Labor continues to expand its crackdown on outsourcing government work to consultants.
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