PwC will seize long-term oversight of its Australian business following the local team’s involvement in a tax leak scandal.
International executives — some of whom were flown to Sydney by the Big Four accounting firm to assess the immediate damage to its brand — are set to remain in place for an extended period, according to two insiders with knowledge of the decision.
Publication of emails
While PwC’s national businesses have autonomy over their operations, its global headquarters is using its rights under the international network’s rules in order to exert influence over the Australian business in response to the misuse of government information, said one of the people, who spoke on the condition of anonymity. PwC’s global office declined to comment.
The response follows the publication of emails showing how PwC used information received during its work with the Australian government to win business by advising corporate clients on new anti-tax-avoidance rules.
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The chief executive of PwC’s Australian business and two other leaders have already stepped down over the scandal, while a former partner has been banned from practising as a tax agent for two years.
Emails released by an Australian senate committee earlier this month show former PwC Australia tax partner Peter-John Collins emailed other PwC offices details of discussions he had been involved in with Australian officials on tax policy. The released emails show that on April 17th, 2015, Mr Collins wrote to a colleague at PwC Ireland, whose identity has been blacked out, saying he was helping the Australian government “think about” tax proposals that he expected to be released in the country’s then forthcoming budget.
The PwC Ireland individual — whom the firm declined to name when asked by The Irish Times this month — responded in an email, copied to two other PwC Ireland staff members, that they had been following developments in Australia and suggested a “chat” the following week.
The are no details of any follow-up in the released email chain. There are also no suggestions that anyone at PwC Ireland was aware that Mr Collins was seeking to share information that was the subject of confidentiality agreements.
The scandal came as insiders said the PwC globally had been preparing to publicly roll out the next phase of a plan to increase the independence of its auditors and “build trust” in its business, a central plank of its global branding since 2021.
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International executives were likely to remain at the Australian business for several months or longer, the person added. The need for international “support” was likely to be heightened by the installation of a new management team in Australia, said another person at the firm.
The move mirrors the response of rival Big Four firm EY when it was plunged into crisis by the collapse of financial services company Wirecard in 2021 after a fraud in Germany and Toshiba’s accounting scandal in Japan in 2015. Both companies had been EY audit clients.
EY’s global legal, audit quality and communications teams were among those given roles in the response to the Wirecard crisis, which led to a two-year ban on new audit work for EY Germany, said people familiar with the matter. International audit quality teams spent several months in Japan following the accounting scandal at Toshiba.
KPMG deployed a similar strategy in 2018, embedding senior international partners into its South African firm after the local business was at the centre of a corruption scandal.
PwC said law firm Linklaters, which is to review the involvement of personnel outside Australia in the leaks scandal, “will have unrestricted access to what they need to enable them to investigate and to inform their recommendations for change”.
Linklaters would be given access to earlier internal investigations carried out by PwC and use these in its review, said people with knowledge of the matter. But PwC Global said the law firm would “form its own independent assessment of what happened across our network”.
Linklaters would be free to carry out additional work and interviews if it wished, said one of the people with knowledge of the matter. The review is also expected to consider whether PwC’s culture and policies were up to scratch, the person added.
Confidential information
PwC has not said whether it will publish the full findings or how long the process will take. Ziggy Switkowski, an Australian corporate veteran who built his reputation running telecoms company Telstra when it was privatised, has been appointed to lead a separate independent investigation commissioned by PwC into its Australian business’s actions.
Linklaters and PwC Australia did not respond to requests for comment.
Deborah O’Neill, the Australian senator who triggered the publication of the emails, accused PwC of a “cover-up effort”.
“There’s sort of the dribbling out of information by signal to people who are requesting it,” she said. “This is hardly transparent.”
PwC Global said the sharing of confidential information by its Australian business had been “unacceptable”.
PwC’s US and UK businesses, some of whose partners were involved in emails about the confidential information, declined to answer several questions about the progress of their investigations or the people involved. — Copyright The Financial Times Limited 2023
