Australia needs consulting contracts policing after PwC woes

Australia’s government should disclose all contracts with consulting firms worth more than A$2 million ($1.3 million) and create a separate committee to approve them, following an inquiry into an industry plagued with scandal and turmoil.

As part of the months-long investigation, the Senate Finance and Public Administration References Committee made a total of 12 recommendations, according to the parliamentary report released on Wednesday into the use of consultants by the nation’s government. They fell short of what’s needed, said Greens Senator Barbara Pocock, who pushed for the inquiry. 

Wednesday’s report is the latest in a period of intense scrutiny that began last year with revelations that the Australian arm of PricewaterhouseCoopers LLP shared confidential information from its work with the government on upcoming tax changes to generate new business at private firms. That resulted in the senior PwC partner at the heart of the scandal getting an eight-year ban from providing financial services and formed the basis for inquiries into allegations of conflict and ethics breaches across firms in the industry and at multiple levels of government.

Since the revelations, PwC Australia has overhauled its leadership and sold off its government services unit for just A$1 (67 cents).

Senator Pocock said the report’s recommendations didn’t go far enough to fundamentally change the industry. Some earlier proposals had sought to ban political donations and limit hiring between the firms and government, as well as barring PwC for a number of years from federal contracts.

“The modest recommendations in the final report are inadequate to meet the crisis uncovered by this inquiry,” she said in a statement.

“In the face of indisputable evidence of a betrayal of confidential tax information by PwC, there are no new recommendations to impose penalties on PwC, despite ongoing investigations and evidence of new misdemeanors,” she said.

PwC is among other consulting and tax audit firms globally that have faced public scrutiny in recent years for their involvement in a string of scandals from China to the US and elsewhere. The sector has also seen thousands of job and budget cuts as demand for their services wane.

Audit flaws

The Food and Drug Administration in the U.S. stopped using McKinsey & Co. in 2022 after revelations that it contracted with both government clients and opioid manufacturers on related issues. The firm also drew U.S. political ire earlier this year, including from Republican Senator Josh Hawley, who accused McKinsey of aiding the Chinese government’s industrial ambitions. Meanwhile, Ernst & Young said in late 2023 it would make changes to its U.S. business after regulators repeatedly found flaws in its audits.

The PwC network globally has also been hit with a string of global scandals. It lost a handful of Chinese clients in May alone, adding to a list of more than a dozen firms it’s stopped auditing in the country in the last two years. PwC has been under intense scrutiny after China launched one of the biggest investigations of financial fraud in history involving developer China Evergrande Group.