Chair's Foreword

It was at Senate Economics Estimates on the evening of the 15th of February 2023, in response to my question, that the CEO of the Tax Practitioners Board Michael O’Neill revealed that Peter John Collins – a partner at PwC – had conspired along with ‘20 or 30 people’ to monetise confidential Australian Government information for the benefit of PwC and its clients.

Following this revelation, questions on notice to the Tax Practitioners Board led to the release of 144 pages of internal emails detailing the depth of the deceit, and a disturbing cultural failure within the major international accounting and consulting firm. The emails revealed the hidden inner workings 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 became synonymous with a profoundly disturbing breach of public trust.

The subsequent public outrage has ensured the strength of the 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 has already implemented significant legislative change, as the Treasurer, Finance Minister, Attorney General and Assistant Treasurer introduced immediate reform. Still, there remains more to be done.

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 function of our financial markets.

For those who use their services, it is almost impossible to think that there was a time when they didn’t exist.These entities have entrenched themselves as the trusted and independent ethical providers of audit and assurance services that purportedly verify the truth and accuracy of financial statements of companies of all sizes.

Therefore, it is 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 upon audited financial statements.

The Big Four are all partnerships, and together audit 193 of the top 200 companies in Australia. What they do matters, and it matters to us all. In the course of this inquiry, we heard from many former senior members of the profession who understood their centrality in the financial ecosystem and they were deeply proud of that work. Many also bemoan 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.

The Committee’s inquiry has been an extensive one, framed around the regulatory, cultural and legal issues which govern the conduct of multidisciplinary firms.

Concerningly, we have 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. This culture thrives on conflicts of interest which are all too frequently ignored, ill managed, or even exploited.

With regards to the structure of these firms, the Committee has recommended that the proliferation of partners be recalibrated to match the numbers 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 service 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 will return the focus back to providing objective and independent services and eliminate many of the current inherent conflicts of interest.

On the regulatory side of the equation, mechanisms to strengthen the standards, liability and independence of the bodies that actively monitor and enforce compliance should be considered by the Australian Government.

It is also essential to promote healthy competition within the audit and consulting sectors. The recommendations of this 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 use of small and medium-sized consultancies, particularly those that solely undertake government work, as a means of uplifting these businesses and reducing the potential for conflicts of interest among consultants undertaking government work.

Throughout the course of the inquiry the committee contended with varying levels of transparency and willingness among large firms with their 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, and far too often was provided only after protracted delays and resistance to requests from the committee.

This failed to meet the standards required by the Parliament and also fell short of public expectation. The inability of the firm’s former CEOs Luke Sayers and 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 and Mr Seymour’s relationship with and treatment of Commonwealth officials of at regulatory bodies, especially the ATO and TPB, revealed that same practice of ignoring, avoiding and delaying proper scrutiny that this committee has had to confront and manage.

I also hold grave concerns about the leadership of the current PwC Australia CEO Kevin Burrowes. PwC International’s secret side-payment to Mr Burrowes and the firm’s continued refusal to hand over the Linklaters Report and related documents into the foreign PwC network partners involved in the scandal demonstrates a dismissive attitude towards the Australian Parliament and a failure to identify a glaring conflict of interest.

It is 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 all ongoing investigations, and resolution of outstanding matters still at large in the public sphere.

We have 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 national sovereignty should not ever be compromised by international franchise actions or contracts.

I am proud to have chaired this report into the structural challenges in the audit, assurance and consulting industry. It is my hope that our recommendations will clear a path forward for the sector, increasing the security of our government information, and the security of every Australian. Through our corporate entities and our superannuation we each have a stake in the health and stability of this sector.

The report documents a wide range of perspectives, and I would like to thank everyone, including academics, members of the industry, and concerned citizens for their submissions and verbal evidence throughout the course of the inquiry.

I also wish to extend my sincere thanks to the entirety of the committee for their diligent work. The multi-partisan collaboration involved with the inquiry and the delivery of a unanimous report reflects the capacity of our parliament to put the public interest first and achieve meaningful outcomes for the Australian people.

I would like to thank Deputy Chair the Hon Alex Hawke MP, Senator Paul Scarr, Senator Barbara Pocock, Senator Louise Pratt, Dr Daniel Mulino MP, the Hon Luke Howarth MP, Ms Zaneta Mascherenas MP, Mr Steve Georganas MP, along with their staff, and former member of the committee the Hon Keith Pitt MP, for their close attention to this inquiry and regular attendance.

Sincere thanks also go to the committee Secretariat staff who have so professionally and carefully facilitated the inquiry over the more than 12 months of its duration. Without them, this report would surely not be possible.

Since May of 2023, the Australian Financial Review, The Australian, The Sydney Morning Herald and The Age, ABC, The Guardian, Daily Telegraph, Bloomberg, Sky News, Reuters, The Canberra Times, The Saturday Paper, The Mandarin, The International Tax Review and the Financial Times, among many others, have provided ongoing and comprehensive coverage of developments in the sector. The work of many journalists for these outlets has ensured that misconduct within the sector was brought into public view, and these companies were accountable not just to the Parliament or regulators, but also to the Australian people.

Most of all, I wish to thank the countless decent Australians who have called my office and written to me, either by hand or through email, expressing their outrage at the tax leaks scandal, and in many instances sharing the personal experiences of misconduct and cultural and governance failures they have witnessed within the audit, accounting and consulting sector. Whistleblowers took their role seriously and provided Senators and members with important insights that enabled us to undertake informed scrutiny and we thank them for their service to their fellow Australians. This report is a testament to bravery of people who see something that is wrong, have the strength to call it out, and the perseverance to create lasting change.