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Standards are at rock bottom – and still falling

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Another week, another scandal. This time, PwC has been making hay with confidential information from the Australian government. Philip Fisher observes a profession in freefall.

18th May 2023
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Writing a column about the accountancy sector can sometimes be uplifting but, all too often these days, it is deeply depressing as standards hit rock bottom – and then go down.

To set the scene, perhaps the gold standard should be to meet the goals set by our country’s prime minister. These were nicely contextualised in an article written by Daniel Bruce, Chief Executive of Transparency International UK. “During his first speech as prime minister on the steps of Downing Street, Rishi Sunak pledged to lead a government with ‘integrity, professionalism and accountability at every level’. Key to making good on this commitment is ensuring the highest standards from those appointed to senior roles in his administration.”

It is very hard to argue against these principles but, apparently, also nigh on impossible to apply them consistently. Look at the problems that poor Mr Sunak is suffering, primarily due to the low ethical standards of some of his most senior colleagues.

Scandal-ridden industry

Our industry seems to be scandal-ridden, with each enormity managing to outdo the last. Readers do not need to be reminded of audit failures that have cost stakeholders billions in large organisations that were failed by their management but also, in too many cases, their auditors as well.

You would have thought that leading experts in our field would learn from mistakes and clean up their acts but, as a number of respondents to this column have argued, nowadays perhaps they just regard fines and settlement costs as standard business expenses associated with cutting other costs to the bone.

Poor performance is one thing, but attempted fraud in a previously highly regarded profession is staggering.

That is exactly what happened recently when a leading firm was investigated for a poor audit by the Financial Reporting Council (FRC) and supported its claims to innocence with fraudulent documentation and data.

It isn’t just audit. How could anyone respectable running a firm of accountants allow employees to indulge in institutional-level cheating on exams that are designed to prove their probity?

Breach of trust

This week, we learn of a new scam that might take the biscuit. This insider-dealing story emanates from PwC in Australia but has sent shockwaves around the world, since the information generated had scope to boost the profits of the firm in multiple jurisdictions.

Readers of this week’s Observer will surely have been shocked at an article headed “‘Disgraceful breach of trust’: how PwC, one of the world’s biggest accountancy firms, became mired in a tax scandal”. In case anyone could still be in any doubt about a possible misunderstanding, the introduction punched home the message: “PricewaterhouseCoopers used government secrets to help clients in Australia and the US avoid tax – a scandal that has forced resignations and threatens contracts worth hundreds of millions”.

An Australian senator, Deborah O’Neill, didn’t pull her punches: “This is a disgraceful breach of trust, a sickening example of a lack of integrity, and reveals a toxic culture of unprofessional practice at PwC that stretches across the globe.”

She also accused the top boards at the firm of involvement in “the deception of the Australian parliament, the Australian people and a betrayal of the ethical and professional standards they should be upholding”, while other senators expressed concern that such issues spread beyond PwC to other major firms.

Some might be shaking their heads and thinking, “It could never happen here”. Think again, as the information leak was shared generously and even reached the United Kingdom.

Scheme of evasion

The underlying problem is also common in this country. Rather than carrying out work in-house, the Australian government utilised consultancy services provided by PwC who provided policy advice regarding impending legislation.

Despite signing confidentiality agreements, they then allegedly shared some of the information across the firm in Australia and beyond and made use of it to give clients a massive financial advantage. This enabled them to benefit from what has been described by an accounting professor speaking to the Senate enquiry into the matter as “a scheme of evasion”.

The irony is that rather than paying backhanders for this wonderful opportunity, the firm received a multi-million-dollar fee for its services.

Did heads roll? Yes, but not very far. Following an internal enquiry, the chief executive of PwC Australia resigned from his position, swiftly followed by two other members of the executive. However, all remained partners and you wouldn’t want to bet that their partnership shares have been reduced to any great degree.

Few British readers will be experts in Australian law but you have to wonder whether these activities are not criminal and, if that is the case, could we see some of the firm’s partners heading to prison? That would be a terrible advert for the profession.

You would like to think that this story represents our industry at rock bottom. However, judging by recent experience something even worse will come along before the metaphorical ink dries on this column.

Replies (4)

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By Hugo Fair
18th May 2023 15:03

'Standards ... what are they? They're just for the little people' (with apologies to Leona Helmsley).

From the perspective of the average senior Partner, there is absolutely no correlation between all those annoying tick-box exercises (which you employ others to do for you anyway) and the only true performance measure (divvying up the profits).

All the headlines/fines/etc don't even touch the sides ... they're just one of the 'costs of doing business' (and quite affordable - or they wouldn't be tolerated).

Thanks (1)
the sea otter
By memyself-eye
18th May 2023 20:50

I have an 'ideal standard' but in my case it's a central heating boiler. I trust it more than I do most 'professionals'

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RLI
By lionofludesch
21st May 2023 16:53

A bit of jail time might concentrate people's minds.

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By tedbuck
22nd May 2023 11:07

Well I don't expect the ProfBods will be overly concerned - after all PWC are not little people who can be fined and charged with impunity for failing to tick boxes.

On the other hand aren't the ProfBods responsible for overseeing PWC etc? Could we not see them being fined for not doing their jobs properly?

Still - no they'd only pass it on to us to cough up - wouldn't they?

Certainly doesn't give you confidence in the ProfBods does it?

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