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Under-fire accounting and consultancy firm PwC has directed nine of its partners to take leave pending the outcome of an internal investigation into the leaking of confidential Australian government tax information.
Key points:
- PwC is under fire for the leaking of confidential Australian government information related to tax changes for large multinational corporations
- The firm has refused to release the names of other people who were copied in on emails related to the leaked information
- Nine partners have been directed to take leave and PwC will separate out its federal government advice functions
The firm also announced that the chairs of its governance board and designated risk committee are stepping down, with two independent non-executive directors to be appointed to the governance board.
PwC will also "ringfence" its provision of services to the federal government, with a standalone executive and governance board to oversee those operations from September onwards.
In addition, the firm has now committed to publishing in full an internal report being conducted by Ziggy Switkowski for PwC when it is completed in September.
Previously, the firm was planning only to publish a summary of the report and its recommendations, but changed its mind "after listening to our stakeholders".
However, the firm's acting chief executive Kristin Stubbins has continued to resist calls, including from the prime minister, for PwC to release the names of all individuals who were party to the emails related to the leaked tax information.
"There has been an assumption by some that all those whose names have been redacted must necessarily be involved in wrongdoing. That is incorrect," Ms Stubbins wrote in an open letter.
"Based on our ongoing investigation, we believe that the vast majority of the recipients of these emails are neither responsible for, nor were knowingly involved in any confidentiality breach.
"We have and will continue to take appropriate action against anyone who is found to have breached confidentiality or failed in their leadership duties."
Ms Stubbins also reiterated that the firm's multinational corporate clients knew nothing about the breach of confidential information.
"Our clients were not involved in any wrongdoing and no confidential information was used to enable clients to pay less tax," Ms Stubbins argued.
However, earlier in the open letter, the acting CEO admitted that the firm was "aggressive" in marketing its corporate tax services at the time.
"At the time this occurred, there was a culture of aggressive marketing in our tax business," she said.
"Over a period, this aggressive behaviour and drive for growth permeated certain parts of our leadership and allowed for profit to be placed over purpose.
"Our governance process failed to identify and keep this in check."
Australian Taxation Office second commissioner Jeremy Hirschhorn recently told a Senate committee that, to the ATO's knowledge, the confidentiality breaches had not resulted in lost revenue.
"We identified these schemes very early, no companies implemented those structures, and we protected the revenue so that Australia did not lose money as a result of this breach of confidentiality," he said.
Former ACCC boss urges break-up
Former Australian Competition and Consumer Commission chair Allan Fels told ABC TV's The Business program that there are three major problems with the way the big four accounting and consultancy firms operate in Australia.
"First, audit businesses probably shouldn't do consulting and tax advice, they should just do audit," he argued.
"Second, excessive use of these sorts of consultants by governments.
"And, third, if they're being used, proper transparency and accountability."
Mr Fels said he expects these companies will be forced to split off their audit arms within the next decade, if they do not decide to do so voluntarily before then.
"Conflicts of interest between trying to do audit, which is really important in a market economy, and combining that with consulting, tax advice, and so on, which often puts pressure on the audit function to make compromises," he said.
"We've got to not just think there's a few rotten apples in the barrel, we'll fix them up. There are much more fundamental issues now on the table, about the deep conflicts that are inherent in the way the audit firms do other forms of business."
However, while Mr Fels thinks it is inevitable the firms will either break up or be broken up, he does not believe it will happen easily.
"It's not technically difficult, it's just politically difficult because they'll resist," he said.
"It's far more profitable to combine the activities, but that's against the public interest often."
Ms Stubbins has reiterated the firm's apology for the confidentiality breach, which enabled PwC to market tax strategies to multinationals that would minimise the impact of changes implemented by the Abbott Coalition government to tax more of their revenue in Australia.
"I want to apologise on behalf of PwC Australia. For sharing confidential government tax policy information and for betraying the trust placed in us," she said.
"Specifically, I apologise to the community; to the Australian government for breaching your confidentiality; to our clients for any questions this may have raised about our integrity and trustworthiness; and to the 10,000 hard-working, values-driven PwC Australia partners and staff who have been unfairly impacted."