Chanticleer
Welcome to the big four’s worst nightmare
The skewering of Deloitte’s CEO before a parliamentary committee shows the veil of secrecy the big four has enjoyed is gone. And now tougher regulation looms.
From the banking royal commission to the multiple inquiries into Crown Resorts and The Star Entertainment Group, we’ve become accustomed to seeing respected business leaders squirm before a public inquiry.
On Monday, it was the turn of Deloitte Australia chief executive Adam Powick, who appeared before the Senate inquiry into the consulting sector.
Under heavy questioning from Labor senator Deborah O’Neill and Greens senator Barbara Pocock – who have led the parliamentary crusade around PwC’s tax scandal – Powick was taken to a place where no banking or casino boss had been forced to go.
Deloitte chief executive Adam Powick answers questions in a Senate inquiry into consulting services. Martin Ollman
Did Powick believe his $3.5 million annual salary was “really worth seven times the salary of the prime minister”, O’Neill asked.
Sensibly, Powick answered in the negative – before playing the “they’re-doing-it-too card”. “We’re in a free market,” he said. “I have set my salary and my salary is set to be commensurate with others that play a similar role in our profession.”
O’Neill argued her line of questioning on pay was reasonable given the firm earned about one-quarter of its revenue last financial year from public sector work. But what it really emphasised was that the veil of secrecy that Australia’s big four accounting firms have enjoyed for decades has been blown apart by the PwC scandal.
No part of their business will be regarded as off limits, no question too embarrassing.
The committee skewered Powick on a range of Deloitte’s past sins: a troubled investment scheme run by former Deloitte partner Amberjit Endow, which Powick invested in; the scrutiny (or lack thereof) of audits; and Deloitte’s apparently inadvertent breach of confidentiality around secret government information during a project. It was a bruising encounter.
But an uncomfortable morning in Canberra is the least of the worries facing Powick and his big four colleagues.
The bigger danger was surely emphasised by the first and final witnesses on Monday: former ACCC boss and professor Allan Fels, and former KPMG partner turned industry whistleblower and University of Wollongong professor Brendan Lyon.
Lyon neatly summed up the regulatory twilight zone that the big four operate in. They look like quasi corporations, with chief executives, chairmen and boards, and have established themselves as the honest arbiters of right and wrong in corporate Australia.
But Lyon argues the partnership structure means they can operate in a way that is “risk-free, tax-free and consequence-free”, and the little oversight they face comes from regulators that are weak and conflicted.
The thrust of questioning on Monday suggests this committee will consider how the sector will be regulated in the future. Fels argued the big four need to be broken up, with their auditing practices split from their consulting and advisory divisions. Lyon says the sector needs a tough independent public regulator.
It’s the sector’s worst nightmare: embarrassment today, new regulation tomorrow.
Introducing your Newsfeed
Follow the topics, people and companies that matter to you.
Find out moreRead More
Latest In Professional services
Fetching latest articles