Corporations and Financial Services Joint Committee Report

Mr HAWKE (Mitchell) (17:59): At the request of the Chair of the Parliamentary Joint Committee on Corporations and Financial Services, I present the committee's report, incorporating presenting reports, entitled Ethics and professional accountability: structural challenges in the audit, assurance and consultancy industry.

Report made a parliamentary paper in accordance with standing order 39(e).

Mr HAWKE: by leave—I rise to speak to the very important report that the Parliamentary Joint Committee on Corporations and Financial Services has conducted throughout the course of this year in response to the very serious matters that were revealed at the Tax Practitioners Board. Peter-John Collins, a partner of PwC, conspired with perhaps 20 to 30 people to monetise confidential Australian government information for the benefit of a particular consultancy firm, PwC, and its clients. I think there's an important signal to industry here that, if government is your main client and you're earning revenue of hundreds of millions of dollars from the government, you have to have the highest of standards and probity in relation to the transparency and operation of your business.

Certainly the government is not to be ripped off, just like any other business in our economy and society. And, if the government is ripped off and we make the rules and we make the laws, the taxpayer rightly expects action in response from the parliament, the government and the authorities. While normally coalition members would be quite averse to red tape, regulatory burden, it's clear that we are supportive of a majority of the recommendations made in the committee report. I thank the committee chair, Senator O'Neill, for her great work and her dedication to this task, because we do agree with the need for greater governance, disclosure and transparency requirements being imposed on large professional partnerships, including the large multidisciplinary accounting practices, given their significance to the Australian economy and the way the consultancies are embedded in government work.

Indeed, the inquiry has indicated there needs to be a range of forms implemented with respect to matters such as regulatory oversight, disciplinary procedure and the calibration of appropriate penalties for misconduct. We do agree with these recommendations because the revelations that partnerships were so large and people had no idea what was going on when we're talking about the theft of the Australian government's information and the monetisation of it overseas is deeply disturbing and does require transparency and other changes to ensure that this conduct, which may have been isolated to particular people within firms, isn't abused in the future.

There are, of course, a limited number of recommendations where the coalition does have reservations. We appreciate the intent, but we do think the recommendations go too far. In particular, there was idea that reforms would be staged in a way that would take existing businesses, with large partnerships being the example, and then somehow reduce those to an arbitrary number. There was no evidence about this, in our view, and indeed the recommendation were to reduce to 400 partners. It's very unclear how this would work or could be implemented in practice, and it was a very arbitrary figure that was argued about by the committee without an evidence base that that would produce a particular better result. I would mention that, in theory, we do not oppose the idea of capping partnerships in the future or having a future based cap in terms of the number of partners within these firms. Certainly, the government has previously passed laws that increased the cap to 1,000 partners. Reducing to 400 does feel arbitrary. It may not work and it would create great economic chaos without benefit, so we certainly have concern about that.

In relation to the other recommendations, I point to the fact that we do indeed support many of the strong recommendations that have come through in the course of the inquiry. It's paramount, of course, to have trust in the auditing services provided by firms, given the function of providing independent truth isn't marred by secrecy or this lack of transparency for regulators and the government when it inquires.

Given that all the partnerships are the model that is adopted by the big four in Australia, this is a signal from the government, a signal from the committee and a signal from the parliament that we are serious about reform in this sector. The UK has taken a series of reforms that are more strident in many ways. We've made recommendations, and some of those have to be scaled back. But this is a clear signal from both sides of the committee—and there are many recommendations; this is a substantial reform of the sector—that we want increased accountability and response mechanisms but also cultural change, and that cultural change won't come without some regulatory and systemic change.

That's why there are so many recommendations. Sometimes recommendations are overdone in these committee reports, but the signal to this sector, which is now critical to the functioning of our economy, couldn't be clearer. We require standards of governance, and we're recommending that the Corporations Act be amended in a number of ways, including to make sure that public interest entities, which all the big four would be designated as being, are required to have their financial reports audited and a public tender process undertaken every 10 years. Again, we've spelt out measures that we think will actually make a difference in public trust, in trust from the government and in trust from the taxpayer in making a difference to the future, given the central role these firms are now playing in the models.

But I would say to these partnerships: you need to get your own house in order. This committee has had to take the embarrassing steps of heavy-handed regulation because of the cultural situation in many of these firms. The 'see no evil, hear no evil' model is unsustainable in 2024, especially when you work for the government, who makes the laws and the rules. Then, if the government is ripped off and the taxpayer is ripped off, you can expect, with our secret information, heavy-handed regulation to come forward.

We do want change. We want cultural change, transparency change and structural change. But I would say to the firms: Make the changes positively. Get ahead of legislative and regulatory change, and you'll be in a better position. It's really where you should be anyway. And read the room around the world, where governments are cracking down on these opaque arrangements that are producing very poor outcomes, including the monetisation of secret information.

So, thank you for the opportunity today. I want to thank the committee's chair, Senator O'Neill, and all my colleagues on the committee, on all sides. It was a very collegiate process. We did find some shocking information about cultures within firms. It was very disappointing and I think confronting to understand that some of these very high-reputation firms don't have the highest of standards behind the scenes in terms of governance, transparency and what might be expected by the public and by the Australian government. So I want thank all the committee members for all the work that's been done, and the secretariat in particular. I'd have to say that this committee took all the submissions that came through from the public very seriously—from whistleblowers, from people who came forward. I thank them for coming forward and providing us with all the information. I believe that in the report we've done a very effective job of incorporating the concerns of the public, business, people who have worked within these firms, whistleblowers in the past and people who've sought change. I think change can come out of this report.