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The government must avoid punishing hardworking accountants doing the right thing with its response to recent inquiries, the association warns.
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‘Proportionate response’ needed on consulting firm inquiries, cautions IPA
29 February 2024
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11 minute read
The Institute of Public Accountants (IPA) has urged the government to apply a proportionate approach with any reforms it implements once the inquiries into the major consulting, audit and accounting firms are completed.
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The two two inquiries currently underway, sparked by the highly publicised PwC tax scandal, have already seen significant amendments enacted by the government, said IPA general manager for technical policy Tony Greco.
Mr Greco noted that some of the recently implemented measures including the dob-in provisions and restrictions around appointments to the TPB were introduced without any consultation or explanatory memorandum.
The last minute amendments made to Tax Law Amendment (2023 Measures No.1) Bill (TLAB1), will require tax agents to notify the TPB if they have reasonable grounds to believe that another registered agent has breached the code, and that breach is significant. The provisions apply from 1 July this year.
“These new rules create some very challenging scenarios and can have a devastating consequences on a tax agent who was falsely accused of misconduct,” said Mr Greco.
“The TPB in conjunction with Professional bodies have to do their best, trying to make these new rules operative in a practical way before the laws come into effect as from 1 July 2024.”
Mr Greco said this is not the first example of the government making significant changes without proper consultation.
“The right to disconnect rule changes to reform workplace laws, was only made public less than 24 hours before it passed the senate,” he said.
TLAB1 provides the Minister with the power to change the Code of Professional Conduct by legislative instrument.
“We now have the first use of this power in the form of an exposure draft of the Tax Agent Services (Code of Professional Conduct Determination 2023),” said Mr Greco.
“Our initial concerns about this power are now playing out before our eyes, which is concerning.”
The Joint professional bodies have raised a number of concerns in relation to the instrument such as the rules being difficult to understand and the rules driving a move away from a principle-based Code to a partly prescriptive one.
They have also highlighted concerns with the proposed reforms on enhancing the Tax Practitioners Board’s sanctions regime, which were released for consultation in December 2023.
Mr Greco said the Committees undertaking the inquiries into the major accounting, audit and consulting firms will also recommend changes to address perceived deficiencies in the regulatory framework.
The Parliamentary Joint Committee on Corporations and Financial Services is due to report to Parliament on its inquiry, Ethics and Professional Accountability: Structural Challenges in the Audit, Assurance and Consultancy Industry, by mid-2024.
The final report for the other inquiry, Inquiry into management and assurance of integrity by consulting services, is due 28 March this year.
“[The] IPA wants a proportionate approach taken by government so that the majority of accountants doing the right thing are not burdened with more regulatory imposts,” he said.
“What happened at PWC was an isolated incident of an individual at a large accounting firm doing something that was just blatantly wrong, and it’s not a systemic issue that’s widespread across the accounting profession in Australia,” said Mr Greco.
“It appears that culture at some of our larger accounting practices works against some of well-established ethical and professional standards.”
Mr Greco acknowledged that the incident has exposed some major regulatory gaps that need to be addressed in order to to improve governance arrangements and prevent something like this from happening again.
“[However], the professional bodies are advocating for a proportionate response from the government to avoid punishing all of the hard-working accountants that were doing the right thing,” he said.
“The accounting profession already has strong ethical standard frameworks in place that govern professional behaviour, so it’s really more about improving the ability of the regulators and the professional bodies to enforce these standards, than it is creating new ones. Accounting bodies had already ramped up mandatory ethical training prior to PwC incident.”
Mr Greco said there are other measures the government could also consider like defining the term accountant at law to protect the public from unqualified accountants or requiring consultants to adhere to the same professional standards that govern accountants, as part of its procurement process.
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