The Australian government announced Wednesday it is considering breaking up the country’s four largest accounting firms and placing them under the oversight of the national corporate regulator, following a string of damaging scandals in the industry.
Australia’s Treasury department released a discussion paper outlining several possible reforms, including capping the number of partners at accounting firms at 400 — down significantly from the current limit of 1,000.
The paper identified the Big Four firms — Deloitte, EY, KPMG, and PwC — as the focus of concern, stating that their recent behavior had revealed weaknesses in Australia’s regulatory system. The paper also compared how these firms are overseen in Britain and the United States.
Assistant Treasurer Daniel Mulino released a statement addressing the issue directly. “In recent years, we have seen behaviour from some large accounting, auditing and consulting firms in Australia that is not fair and honest,” he said. “This has undermined trust in the firms themselves and raised broader questions about the resilience of the frameworks meant to uphold market integrity.”
The proposed reforms largely reflect recommendations made by parliamentary inquiries that were sparked by a 2023 scandal involving PwC, in which confidential government policy information was leaked to help the firm attract new clients. The majority of those recommendations have not yet been put into practice.
KPMG is also currently facing allegations from a whistleblower who claims the firm shared confidential company information with potential private-sector clients in order to secure auditing contracts.
Deloitte responded to the announcement with a statement from a company spokesperson: “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.”
EY Oceania CEO David Larocca said his firm supported many of the options laid out in the paper. “We have an important role to play in restoring and maintaining trust in the sector,” he said. KPMG and PwC had not responded to requests for comment at the time of publication.
Currently, the Big Four firms in Australia operate as partnerships rather than corporations, which means they fall outside the jurisdiction of the Australian Securities and Investments Commission — the national corporate watchdog with strict reporting requirements. They are instead governed by state-level laws.
Speaking on ABC Radio, Mulino raised the question of whether the federal regulator needs a larger role. “There’s a question over whether ASIC needs to step in more as the federal regulator,” he said.
Among the most significant options being considered is structural separation, which would require the firms to divide their auditing and consulting operations into separate entities. A less drastic alternative — operational separation — would simply prohibit firms from providing both audit and non-audit services to the same client.
The government is also looking at whether to lower the current 1,000-partner cap to bring it in line with the 400-partner ceiling that applies to other professional services industries, such as law.
The public comment period on these proposals closes on August 12.
