PwC’s Tax Scandal Rocks Australia’s Financial Market
Australia’s largest pension fund, AustralianSuper, with almost three million members and $191bn of assets under its management, has refused to enter into any new contracts with PwC as the “Big Four” consultancy struggles to contain the terrible infamy brought about by a tax scandal in one of its biggest markets. AustralianSuper will instead conduct a review of its audit contract with PwC at a later time. As the fallout from a damaging email scandal continues to dominate headlines, a growing number of firms in Australia, PwC’s largest market, are re-evaluating their relationships with the consultant in the wake of the consultancy’s breach of confidentiality. Both the Reserve Bank of Australia and Treasury Officials have also revealed they are to make future decisions on PwC’s ethical behaviour before securitising deals with the company.
PwC Email Scandal Damages Reputation
The extension of PwC has been under intense public scrutiny over the past month since emails revealed its use of confidential government tax information to acquire new business. In the aftermath of the breach of confidential information, PwC suspended nine partners this week pending the outcome of investigations in September as it aims to minimise the impact of a scandal that has engulfed its Australian and international operations. PwC senior management is scheduled to appear before the Senate in Canberra next week, where they will answer questions about the scandal. As the government refers the matter to the police for prosecution, it is critical that PwC can convince federal institutions that its internal review and the resignation of all affected partners are enough to regain trust and restore public and private sector working relationships.
AustralianSuper Cuts Pwc Contracts
AustralianSuper confirmed that its concern regarding the ongoing revelations concerning PwC has increased to such an extent that it has decided to freeze any new examinations with one of the largest consultancies in the world. AustralianSuper is partially owned by the Australian Council of Trade Unions and spent more than $2m with PwC last year. Commenting further on their decision, a spokesperson for the pension fund stated AustralianSuper had expressed its anxiety to PwC last week at the highest level and had now taken the step of freezing new contracts until it has reviewed its audit contract later in the year.
PwC’s Reputational Woes Continue
PwC’s extensive network across the globe earned $37.7bn in revenues last year, however, recent events have likely had a significant impact on their standing. Amid review of PwC’s role in the matter, critics across the world have raised concerns over the larger issue of ethical dilemmas at prominent consulting and auditing firms. Both the Reserve Bank of Australia and Treasury Officials have gone as far as to express concern that this behaviour should now be taken into consideration when new contracts are secured.
Summary
PwC is facing a severe, international reputational challenge that has called into question its ethics after its breach of government tax information in Australia, leading to the suspension of nine partners this week. AustralianSuper, one of PwC’s largest customers in Australia, has decided to freeze any new contracts with consultants in light of these ongoing revelations. The Reserve Bank of Australia and Treasury Officials have also expressed their views that it is the ethical behavior of the company that should now be taken into consideration when securing new contracts. Critics across various industries have pointed out larger issues within prominent auditing and consulting firms, and the effects of these revelations will potentially be widespread across PwC’s global consultancy network.
Additional Piece
While PwC has remained relatively successful despite negative press dominating headlines in recent years, this latest development could have effects with wider implications for their business prospects, not just in Australia, but globally. It seems more likely that other large firms may hesitate to approach them with work, partly due to a fear of any scandal carrying over to them or also due to general dissatisfaction and distrust in their tactics.
These issues also call attention to the issue of ethical behavior in these highly-connected consulting and auditing environments. As billions of dollars are at stake, the apparent disregard for privacy and fair play can conflict with the core missions of these firms and the values of the societies for which they serve. Many critics have also raised concerns regarding the relationship between auditors and consultants, raising questions on whether the two roles can coexist under the same organization without any negative impact on regulators and shareholders.
It will be interesting to see how PwC moves forward from this crisis and whether other consultancies consider changing their business conduct to reduce the risk of a similar event. Whether the proactivity of AustralianSuper and other organisations will result in lasting changes in the way company contracts are handled remains to be seen, but in the increasingly digital age, businesses are becoming wary of making mistakes that could undermine consumers’ confidence and upset the wider business community.
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Australia’s largest pension fund said it would not sign any new contracts with PwC as the consultancy grapples with the aftermath of a tax scandal in one of its biggest markets.
AustralianSuperwhich has nearly 3 million members and A$290 billion ($191 billion) in assets under management, said Friday it would freeze any new work with the Big Four firm and review an audit contract later this year.
“AustralianSuper is concerned about the ongoing PwC revelations and has consequently frozen any new PwC contracts,” a spokesperson for the fund said. AustralianSuper had expressed these concerns “at the highest level” to PwC last week, he added.
PWC extension has come under intense public scrutiny over the past month after the release of emails showing it had used inside information about government tax law changes to acquire new business.
It nine members suspended this week awaiting the outcome of an investigation in September as it moves to ease the impact of a scandal that has engulfed its Australian and international operations.
A growing number of companies in Australia, one of PwC’s largest markets, are reviewing their relationship with the consultant following the breach of confidentiality.
AustralianSuper is the latest organization to place restrictions on PwC following the scandal. The Reserve Bank of Australia said Wednesday it would not give the company new business pending the outcome of the review. Treasury officials also said the ethical behavior of consultants should now be taken into consideration when securing new contracts.
AustralianSuper, which is partly owned by the Australian Council of Trade Unions, said it spent more than A$2 million with PwC last year.
PwC management will appear before the Senate in Canberra next week to answer questions about the scandal. The firm is expected to come under increased pressure to release the names of partners involved in the use of the confidential information and any clients who have benefited from the tax advice.
The government, which has referred the matter to the police to consider prosecution, she said it was up to PwC to convince her that the firm’s internal review and the resignation of all partners involved in the scandal were sufficient compensation to resume working with the public sector.
https://www.ft.com/content/fc5d712f-a0d7-41b9-971f-b6fb8e937605
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