Michael Sharpe is a pillar of the Sydney business establishment. The long-serving ASX director and former Coopers & Lybrand audit partner was appointed by the Greiner Government in 1992 to sit on the NSW State Super board and Peter Costello gave him a gig overseeing Military Super in 1998.

When the sharp suits at Babcock & Brown were looking to float in 2004, they needed some respectable non-executive directors. Who better than Michael Sharpe given he’d been on the ASX board since 1995 and was a former President of the Institute of Chartered Accountants and chairman of the International Accounting Standards committee.

As his biography on the Babcock & Brown website shows, Sharpe was made chairman of the audit committee, where he no doubt keeps the audit team from Ernst & Young on their toes.

However, there’s one small problem here. Sharpe works out of an office provided by PricewaterhouseCoopers at their Sussex Street headquarters. Crikey called his secretary at PwC this morning and was told he was already enjoying his Christmas break down on the farm.

At one level, this shouldn’t be a problem, but you then have the question of who audits the various Babcock satellites. The PwC name pops up regularly with the likes of Babcock & Brown Wind Partners, Babcock & Brown Capital and Babcock & Brown Japan.

And the PwC grip over the satellites is rising. Babcock & Brown Power has just been floated this month and the prospectus includes the following note:

Ernst & Young has acted as the auditor for BBP for the year ended 30 June, 2006. Ernst & Young have indicated they will resign as auditor of BBP on the allotment date. PricewaterhouseCoopers will be appointed auditor in their place.

Did the Babcock & Brown audit committee insist on this change? If so, what role, if any, did Michael Sharpe play in the appointment of PwC? Even if he had nothing to do with the decision, it is not a good look for PwC to be making millions out of the Babcock empire whilst providing an office to the chairman of its audit committee.

We’ll bring you the explanations from all parties in the new year.