KPMG to face heat from Senate’s consultant committee as PwC dodges call-up due to AFP inquiry

A Senate committee expected to focus on the use of confidential information by PwC Australia will instead turn its attention to KPMG.

KPMG will face a grilling at a Senate inquiry on Wednesday over conflicts of interest issues in aged care and advice over putting NSW rail assets into a separate company, as well as a re-airing of its mass cheating in an ethics exam.

The big four accounting firms are currently facing the unusual glare of public scrutiny because of revelations about a tax leak scandal at PwC Australia.

PwC has been exposed as having taken confidential government information provided when it advised on new international tax avoidance laws; and used this same information to pitch to companies on how to avoid tax.

PwC had been expected to face the Senate on Wednesday but instead it will be KPMG in the glare – over problems already revealed to the public over the past few years. It is not clear whether any new issues will emerge.

PwC was given the break due to fears any parliamentary attention could jeopardise the investigation into its former head of international tax, Peter Collins, and its handling of confidential tax briefings.

Treasury referred PwC to the Australian Federal Police two weeks ago after revelations the firm had widely distributed confidential information.

Two weeks ago rivals KMPG and Deloitte stepped forward to issue their own messages to staff on the scandal.

KPMG chief executive Andrew Yates and chairman Alison Kitchen admitted their firm could have improved the way it had handled conflicts between two of its teams – that were supposed to be working separately for Transport NSW and NSW Treasury – on its plans to separate rail assets into its controversial Transport Asset Holding Entity (TAHE).

No one from the KPMG team working on the Treasury account was penalised, despite being exposed as having applied pressure on the KPMG-Transport NSW team to support calls for the assets to be moved into TAHE.

KMPG has also been in the spotlight for being the Aged Care Safety and Quality Commission’s auditor while also consulting on matters including auditing.

The firm was slammed for broadscale cheating in ethics exams. US regulators fined KPMG $US50m globally for the scandal, including a $US450,000 fine in Australia.

Tax Practitioners Board chair Peter de Cure. Picture: Martin Ollman

But KPMG did not face any regulatory consequences for the cheating scandal in Australia. Two partners resigned from KPMG, while 16 other partners and 30 staff faced having their pay docked in response to the scandal.

Ernst & Young faced far stiffer penalties from the SEC for exam cheating when the US regulator hit it with a $US100m fine.

The higher amount was put down to the fact that it came from different authorities and because EY had initially said there had not been any cheating, although it did self-disclose its error to the SEC.

It is expected that US authorities, as well as those in the UK, Europe and Asia, will be looking at PwC’s behaviour in Australia because its leaked tax information was shared with partners beyond Australia, with a specific focus on US tech firms.

When asked about whether it was investigating PwC Australia, a spokesman for the US Public Company Accounting Oversight Board (PCAOB) said he “cannot comment on ongoing inspection or enforcement matters, including whether or not they have been initiated. We carefully monitor registered firms and will not hesitate to take action when rules are violated”.

Australian Taxation Office commissioner Chris Jordan reacts during a Senate inquiry at Parliament House in Canberra.

Senate Estimates call a number of departments to continue questioning that began in recent hearings.

The Department of Finance will front up, with questions expected to circle around the handling of procurement guidelines.

Finance moved to impose bans for PwC partners who received confidential information working on government contracts.

The department also introduced new rules requiring other government departments to review past behaviour and conduct of all firms when considering awarding future contracts.

Treasury, which referred PwC to the AFP, is expected to face questions around the department’s knowledge of the tax leak scandal.

A representative of the Australian Taxation Office will appear before lunch to explain its slow handling of PwC’s breaches of confidentiality.

The ATO last week revealed it took years between first becoming aware of the breach.

The ATO said it had sought advice from the AFP, which declined to take up a formal investigation into the matter.

The ATO also said it had scoped out using its tax promoter penalties, but ultimately decided to refer the matter to the Tax Practitioners Board.

The TPB, which banned Mr Collins for two years, may face further questioning about the PwC matter after last week revealing it was looking at a longer list of staff at the firm as part of its inquiries.