PwC walked a crooked mile — but not alone. The whole ecosystem needs fixing

There has been a myopic focus on PwC Australia’s review of its culture and accountability that will be helmed by Ziggy Switkowski, a prominent company director and former chief executive with some serious governance experience.

Switkowski’s review follows PwC being scrutinised internally and externally for a tax leak scandal involving sharing confidential information with multinationals seeking to manage the amount of tax they kick into government coffers. You can only work to design a workaround that sidesteps anti-avoidance measures if you know what’s coming down the tunnel, so the involvement of former PwC partner Peter Collins in confidential government consultation was key.

Collins is no longer at the firm, and former chief executive officer Tom Seymour — head of the tax team at the time — will leave in September, the same month Switkowski’s deep-dive is supposed to be completed and delivered to the firm.

This review is an internal process. What it finds and what the firm does about it is a matter for it. A statement says it will not hesitate to exit more partners or staff if necessary. But what about the rest of the ecosystem in which PwC, other corporations and the accounting profession in general are recognised and registered under law?

Few people are focused on what really needs to be tweaked, so here’s a list.

Federal Parliament

Since the tax leak blew up in January, we have heard a lot from politicians. They have been quoted so often they resemble a special comments panel during breaks in an AFL match. But the only time politicians get really energised about accounting matters is when there is controversy. Focus on the accounting world long enough, and you will observe that political commentary follows the pattern of controversy here or overseas.

Professional accounting bodies such as CPA Australia, the Institute of Public Accountants, and Chartered Accountants Australia and New Zealand are all recognised in various laws. There is no review of the bodies periodically to see what they do about the continuing education of their members. Nothing. Nada. Parliament at a national level has neglected its responsibility to ensure professional bodies who have members recognised under law — accounting, financial planning and otherwise — are doing their job in the public interest.

Parliament should establish a rolling inquiry that looks at the professions that have this specific recognition under law. This should include the service lines of the big four accounting firms — Deloitte, Ernst & Young (EY), KPMG and PricewaterhouseCoopers (PwC) — that engage in audit, assurance, taxation, financial planning and, where relevant, insolvency.

Periodic monitoring makes far more sense than solely relying on inquiries borne out of front-page outrage over individual case studies.

Tax Practitioners Board

The board needs access to a wider range of penalties to properly deal with code breaches. Take a lesson from the change in legislation across several jurisdictions that has seen exponential growth in the fines a regulator can impose against casinos. The same should apply to professional firms where an egregious breach of standards occurs. A significant fine, as well as any other disciplinary orders, may help deter firms from thinking naughty thoughts.

The board can prohibit somebody it has defrocked from reapplying for a tax agent registration for five years. This should be increased to 10 years, and the board should be able to tailor its approach, depending on the nature of the breach or breaches.

Accountants Professional & Ethical Standards Board

It is frequently said professional firms are large donors to political parties, and it is open for an observer to ask what advantages they seek. The other critical question is how the work done by these organisations for government will be perceived by other stakeholders if they have donated to campaigns for political parties or party functions where it is as clear as day that they are paying for access.

Perception can be king in a world where people do not see how a professional executes an engagement. A perceived lack of independence can lead to cynicism and distrust, and impact not only a firm but the broader accounting profession.

The APESB should have a standard that defines political donations as a threat to independence and to ban them outright. The money saved can be donated to charity.

Securing government work

People providing services to government should be independent and be seen to be independent. The procurement rules should prohibit the acceptance of tenders from or engaging with organisations that have made political donations regardless of how weighty the amount is. Firms should choose whether they want to be political donors or providers of professional services perceived as being high quality and independent.

This is separate from a ban on an organisation or individual from being able to provide government services for a time after they’ve buggered something up. A government as a customer needs to consider whether its credibility is impacted by using an organisation or individual to provide a particular service or services. It is spending taxpayers’ money and the community will at some point sit in judgment on how those resources have been used.

The other side of the transaction

A brief point needs to be made about the other side of the ledger.

Advice that is offered must have a willing buyer. Advice that is a bit tricky or clever is only an idea in an adviser’s head until a person in a company considering its financial plumbing decides to give whatever has been recommended a shot. Should we be thinking more about the people on the other side of the table — not just the advisers?