Australia's four largest banks spent $1.1 billion on Big Four

Australia’s four largest banks – ANZ Bank, Commonwealth Bank, NAB and Westpac – have in the past decade spent over $1.1 billion on fees for hiring the services of Big Four giants EY, KPMG and PwC. 

The majority of the billion-plus fees was paid for audit services, as EY, KPMG and PwC have for long been the go-to trusted auditors of the banks. EY has been National Australia Bank’s  independent auditor for 13 years, KPMG is the auditor of ANZ and PwC serves two of Australia’s Big Four banking institutions; Commonwealth Bank and Westpac. 

Across the ten year period (2008 – 2018), combined some $770 million in audit fees has been transferred to the pockets of Big Four audit partners, with PwC taking more than half of the slice. The revelation comes at a time when the audit divisions of the Big Four are facing mounting pressure, in light of recent criticism by politicians and watchdogs in Australia and internationally on the quality of their work.

In the UK, the Big Four accountancy firms have for the second year in a row failed to reach quality standards set by the Financial Reporting Council, an independent regulator in the UK and Ireland, responsible for regulating auditors, accountants and actuaries. However, in Australia, the last in-depth scrutiny of the audit profession was eight years ago, re-launching debate on the need for a new review.

Conflicts of interest?

Spending data of the Big Four banks shows that alongside providing audit work, EY, KPMG and PwC have also been conducting non-audit work, including tax and management consulting services. This has triggered one of the oldest discussions in the Big Four profession: to what extent can auditors be independent if they have to audit work delivered by consultants from the same firm? 

Traces of potential conflicts of interest are highest at Commonwealth Bank, where around one fifth of the ten-year $336 million bill was shelled out on advisory services. A spokesperson of the bank said however that it tested the independence of its auditor each year, stating: “We have strict policies and procedures in place that govern the independence and work of our auditors and these are regularly reviewed by the Board and the Audit Committee.”

Similarly, both ANZ Bank and Westpac said that their policies on independent auditing surpassed the requirements laid down by Australia’s regulator. In fact, ANZ has capped its spending on consulting work to a maximum of 5% of audit billings in a year. The spending data confirms this – between 2008 and 2018, 4% of all fees went to consultants.

Shaun Dooley, the Group Chief Risk Officer at National Australia Bank, pointed out that it also has limits on the non-audit work EY is able to provide to the bank.

Meanwhile, the country’s largest auditors and consultants have defended their dual roles, stating that they have extensive risk and control processes in place to prevent conflicts of interest.