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August 8, 2019

Big four under the spotlight in Australia

On 1 August 2019 the Australian Senate referred an inquiry into the regulation of auditing in Australia to the Parliamentary Joint Committee on Corporations and Financial Services for report by 1 March 2020. Submissions are due to close on 30 September 2019. The Committee's powers allow it to report to Parliament with recommendations for changes to legislation, regulation and government policy. This is being described as a broad-ranging inquiry looking at the quality, regulation and market for corporate audits; conflicts of interest within the big four firms; and the performance of regulators.

This inquiry follows on from an inconclusive investigation by the Australian Competition and Consumer Commission earlier this year into audit practices and potential anti-competitive behaviour among the big four.

At the same time, the Senate referred a separate inquiry into the impact of changes to service delivery models on the administration and running of government programmes, to the Legal and Constitutional Affairs References Committee for inquiry and report by 16 October 2019. Submissions for this inquiry are due to close on 23 August 2019. Although this inquiry does not directly target the big four in the way that the inquiry into audit practices does it also puts them under the microscope as they are heavily involved as contractors and consultants in a number of the sectors that are the focus of this second investigation.

It is also being reported in the Australian Financial Review that EY is likely to be the subject of a third investigation. This follows on from the hiring in June of former defence minister of Australia Christopher Pyne as a consultant and the recent awarding of a contract worth AUD 2.6m ($1.77m) by the Australian Defence Ministry to EY.

The Senate has voted to set up a committee to review whether Pyne and former minister for foreign affairs Julie Bishop, who joined the board of international consultancy Palladium in July, are in breach of the ministerial code of conduct which states: “Ministers are required to undertake that, for an eighteen month period after ceasing to be a Minister, they will not lobby, advocate or have business meetings with members of the government, parliament, public service or defence force on any matters on which they have had official dealings as Minister in their last eighteen months in office. Ministers are also required to undertake that, on leaving office, they will not take personal advantage of information to which they have had access as a Minister, where that information is not generally available to the public.”

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