Australia Proposes Tougher Oversight of Big 4 Accounting Firms
Synopsis
Following widespread corporate misconduct, the Australian government is weighing significant changes to compliance in the sector, including potentially splitting up Big Four accounting firms and placing them under the oversight of a new regulator,…
Following widespread corporate misconduct, the Australian government is weighing significant changes to compliance in the sector, including potentially splitting up Big Four accounting firms and placing them under the oversight of a new regulator, the audit wing of the Australian Securities and Investments Commission (ASIC).
Treasury Proposes Structural and Operational Changes
Treasury consultation paper, included the maximum number of partners in accounting partnerships to 400 from 1,000. The paper revealed Deloitte, EY, KPMG and PwC, exposed gaps in Australia’s regulatory framework and an increased need for regulation.
The proposed reform broadly follows proposals of parliamentary inquiries investigating PwC, where confidential government information to develop tax policy was passed before being used to win clients. Most of those recommendations have not been implemented yet.
Companies are among those being considered for structural separation, which would involve breaking apart their audit and consulting businesses. One other idea is operational separation, which also prevents firms from providing both audit and non-audit services to one client.
Limiting accounting firms to fewer partners, the current cap is 1,000 but the government is considering dropping it as low as 400, which would put them more in line with restrictions on other white-collar professions including law.
Firms Respond as Consultation Begins
The Big Four are partnerships, not companies, which means they are regulated by state-based laws as opposed to actual ASIC oversight. The government is also currently examining whether ASIC should take a bigger role in overseeing the sector.
The review comes amid continuing scrutiny of the sector, including the collapse of accounting giant PwC over tax leaks and earlier this week allegations against KPMG by whistleblowers about the way it handled sensitive information from companies competing for audit business.
Deloitte, EY and PwC all said they would get involved in the consultation process but KPMG did not respond immediately to requests for comment. The consultation on the proposals will close on 12 August in the public domain.
Source: Reuters
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