Australia proposes break-up of big 4 audit firms after scandals

The Australian government is considering breaking up the Big ​Four accounting firms and bringing them under the corporate regulator's purview following some high-profile scandals in the sector. The proposals, outlined in an options paper from the ‌Treasury department, also include caps on the size of partnerships to 400 from 1,000 and a mandatory rotation of audit firms. The paper said the recent conduct of the Big Four accounting firms — Deloitte, EY, KPMG and PwC — had exposed gaps in Australia's regulatory framework. It drew comparisons with the way the industry is regulated in Britain and the United States.
The federal government has released a new consultation paper proposing stricter regulation of the firms, including increased oversight and heavier penalties. Many of its proposed reforms are welcome – and long overdue. "In recent years, we have seen behaviour from some large accounting, auditing and consulting firms in ​Australia that is not fair and honest," Assistant Treasurer Daniel Mulino said in a statement. "This has undermined trust in the firms themselves and raised broader questions about the ​resilience of the frameworks meant to uphold market integrity." The potential interventions broadly mirror those recommended by parliamentary inquiries triggered by the PwC tax leaks scandal ⁠in 2023, in which confidential government policy was shared to win clients. Most of those recommendations have yet to be implemented. KPMG is also currently embroiled in a scandal over whistleblower allegations ​it shared confidential company information with prospective private-sector clients to bid for auditing work.
Under allegations raised in parliament, partners at KPMG leaked client information and mishandled a whistleblower who raised the alarm. Since then, a host of partners at the firm, including its CEO Andrew Yates and chairman Martin Sheppard have resigned. And on Tuesday, two men were sacked from Ernst and Young after the prime minister's personal banking information was allegedly breached.The claims against KPMG were first formally made by a whistleblower in May 2024, dismissed by KPMG, then came to light when Labor senator Deborah O'Neill aired them under parliamentary privilege earlier this year.
"We welcome the release of the options paper by Treasury and the opportunity to engage constructively on ​any measures, which strengthen trust in the profession," a Deloitte spokesperson said. EY Oceania CEO David Larocca said the firm was supportive of many of the options outlined in the paper. "We have an important role to play in restoring and maintaining trust in the sector," he said in a statement.
PwC said the paper was an "important opportunity to contribute to strengthening and rebuilding trust in our industry". "Our firm has undergone significant transformation across the ​past few years, and that work continues," a spokesperson said. Meanwhile, Peter Nash, a former KPMG national chairman, resigned from Westpac’s board to avoid distractions linked to KPMG’s audit scandal over leaked confidential information. His exit comes as the federal government unveils a consultation paper proposing sweeping reforms to the audit sector.