CPA Australia has warned the government to carefully consider the recommendations made by the inquiry into the big four consultancy firms and their impact on Australian businesses.

The Joint Parliamentary Committee on Corporations and Financial Services has tabled its final report of its investigation into the audit, assurance and consulting sector yesterday, outlining 16 priority recommendations for immediate action and 40 in total.

The committee called for major changes, including a cap on the number of partners in accounting partnerships and the operational separation of audit from other services.

Committee chair Deborah O’Neill said the recommendations would “change the shape of the industry and implement evidence-based solutions that have been proven to work in other sectors and jurisdictions”.

“Such changes will return the emphasis to the provision of objective and independent services and eliminate many of the current inherent conflicts of interest.”

The committee urged the government to reduce the permitted size of partnerships for accountants to a maximum of 400 partners, to align with legal partnership limits. The report recommends implementing the 400 partner cap over a five-year period.

It also called for large multi-disciplinary accounting firms to be prohibited from providing both audit and non-audit/consultancy services to the same client and their associated entities in Australia and overseas.

The report urged the government to introduce new laws that would require large multi-disciplinary accounting firms to implement operational separation between their audit and non-audit practices.

It also wants audit, accounting and consultancy partnerships with more than 3,000 employees to adopt the Companies Act 2001’s requirements for governance and accountability.

The committee also recommended that the Australian Government legislate to strengthen ASIC’s power to take enforcement action against audit firms, not just individuals, including for quality management standards.

He also wants the government to give ASIC more powers to oversee auditing to cover all partners within multidisciplinary firms, regardless of which part of the firm they work in, as required by the Code of Auditing. governance of audit firms from the UK Financial Reporting Council.

He also urged ASIC to establish a program of random audit inspections and complement its existing risk-based approach by also reviewing audit files where conflicts of interest arise as a result of the Big Four firms provide other services to their audit clients.

CPA Australia said it was still carefully considering the report’s recommendations.

CPA Australia head of policy, standards and external affairs Elinor Kasapidis said given the complex and sophisticated nature of the professional services sector, the recommendations needed to be considered in terms of system integrity, advice on capital, consumer protection and efficient administration to ensure there are no problems. unintended consequences.

“If implemented in their current form, many of the recommendations could potentially have a monumental impact on the professional services sector,” Kasapidis said.

“The government should carefully consider the intent of these recommendations and the impact of their implementation on Australian businesses generally.”

Kasapidis said these recommendations could have a direct impact not only on large companies, but also on their customers and the business world as a whole.

“As such, the Government must ensure that any further regulation will not impact the ability of Australian businesses to compete on the global stage,” she said.

Kasapidis also highlighted the need for the government to consult extensively with key stakeholders, including professional bodies, to ensure that reforms are balanced, targeted and effective.

Senator O’Neill said that while the Albanian government has already implemented significant legislative changes in response to PwC’s “egregious and shocking” misconduct, more needs to be done.

O’Neill said the Big Four accounting and consulting firms have established themselves as reliable, independent, ethical providers of auditing and assurance services that are expected to verify the truth and accuracy of financial statements of accounting companies. all sizes.

“It is therefore of paramount importance that there is confidence in the auditing services provided by these firms and that their function of providing independent truth is not tainted by their own opacity,” he said. she declared.

O’Neill also emphasized that the report’s recommendations were made with the explicit goal of protecting “the viability of small entities” as the industry moves toward an increasingly robust regulatory framework.

“The committee also recommends increasing the use of small and medium-sized consultancy firms, particularly those undertaking government work only, as a means of growing these businesses and reducing the risk of conflicts of interest between consultants carrying out government work,” she said.