Australian Parliamentary Committee´s Report Recommends Limiting partnerships to 400 partners, PwC Australia to be barred from tendering for government contracts

| image credits: Committee Chair Labor Senator for NSW, Deborah O'Neill by Madelaine Ren

The Parliamentary Joint Committee on Corporations and Financial Services has unveiled its final report from the inquiry titled "Ethics and Professional Accountability: Structural Challenges in the Audit, Assurance, and Consultancy Industry." Launched in 2023, this inquiry was prompted by serious misconduct revelations within Australia's audit and consultancy sector, including the inappropriate use of confidential Australian Government information by partners and employees at PwC Australia.

Committee Chair Senator Deborah O'Neill highlighted the report's significance, stating, "This report is the legacy of the PwC tax leaks scandal, and the sector-wide misconduct that was uncovered in the aftermath. With our recommendations, we are charting a path forward for the sector, towards a more accountable, transparent and just financial sector." She further emphasized, "The proper function of this sector matters to every Australian. We all have superannuation, and we all rely on audit companies to ensure the security of financial markets."

The comprehensive report presents 40 recommendations, some of which include additional insights from Coalition and Greens members of the committee. Among these, several have been prioritized due to their critical importance to enhancing accountability and transparency within the industry. Key recommendations include:

• Reducing the Partnership Cap: The committee advises that Australian firms structured as partnerships should be limited to a maximum of 400 partners, a significant decrease from the current cap of 1,000 partners. This proposal aligns with existing restrictions on partnership numbers in Australian law firms, although some Coalition members have expressed reservations. Senator O'Neill remarked, "This report marks the end of impunity for a sector which has thrived in darkness for far too long."

• Operational Separation in Multidisciplinary Firms: The report recommends that Australian multi-disciplinary professional services firms must ensure the operational separation of their audit functions. Additionally, it suggests that clients utilizing a firm's audit services should be prohibited from accessing other services offered by the same firm. This measure is designed to prevent conflicts of interest and maintain the integrity of audit practices across the industry.

• Enhanced Accountability in the Consultancy Sector: To bolster accountability within Australia's consulting industry, the committee proposes the creation of a public register of consultants, the establishment of a consultancy code of ethics, and the formation of a compliance body dedicated to overseeing the sector.

Committee Member Senator Barbara Pocock underscored the necessity of these reforms, stating, “The recommendations of this Inquiry are an important step towards positive change, building on the powerful evidence this inquiry has heard. Reprehensible behaviour in the consulting sector has thrived in the gaps in our regulatory framework and bent the cultures of some of our largest private entities. We need comprehensive legislative, cultural and structural change to fix these organisational failures. There is a strong case for change. Shared outrage is not enough, it is essential to see action.”

A particularly noteworthy recommendation targets PwC Australia, advising that the firm should be barred from tendering for government contracts until all ongoing investigations by Australian law enforcement and regulatory bodies are fully resolved.

The committee extended its heartfelt gratitude to all witnesses and contributors who provided valuable knowledge and expertise, which were instrumental in shaping the inquiry's findings. Senator O'Neill affirmed, "No-one is beyond accountability. The recommendations we make in this report deliver transparency and accountability to a malign sector, and deliver justice for Australians who have seen these firms seek to profit at their expense from unethical and unsustainable corporate practices."

As the committee awaits the Australian government's response to its report, it remains committed to fostering a more transparent and accountable financial sector that serves the best interests of all Australians.

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