In a consultation paper released last week, Australia's Treasury proposed limiting the number of partners in Big Four accountancies and forcing the firms to incorporate their consulting businesses, as reported by the Australian Financial Review.
The Treasury expressed doubts as to whether the accounting firms are capable of governing themselves and argued that the existing model of self-regulation through industry bodies was not fit for purpose. The proposed reforms come as the Australian government announced that it had reduced its spending on consultants by $624 million and was planning to cut another $1 billion in the upcoming federal budget. Both moves were spurred by PwC's tax leaks scandal, in which a partner was found to have shared confidential government information with clients.
According to Assistant Treasurer Stephen Jones, the tax leaks scandal exposed severe shortcomings in the regulatory regime for consultants. The paper laid out 17 issues for feedback focused on six key areas of reform: governance; professional standards, regulations, and laws; transparency, public information, and reporting; enforcement and setting standards; protection of whistleblowers; and competition and resilience of the audit sector.
The Big Four firms, for their part, seem supportive of consolidating the fragmented framework by which they are currently regulated and supervised. However, they are likely to be less welcoming of any reforms focused on limiting their size and changing their partnership structure.
Last year, Starling published "Renal Failure: A Crisis in Audit Culture?," a Deeper Dive report into global concerns surrounding audit quality and professional conduct.
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