PwC responds to ASIC criticism with external audit quality board

PwC Australia has installed an audit quality board, consisting of three external members, including the former Auditor-General Ian McPhee. The move comes a week after the Australian Securities and Investments Commission (ASIC) found the audit sector across the country to be falling short of expectations.

Following an annual audit inspection, the ASIC found last week that there were issues with 26% of files processed in Australia’s audit sector in the year leading up the 30 June 2019. PwC’s numbers, while significantly better than other members of the Big Four, were still a cause for concern as the number of problematic files had increased from 12% last year to 18% this year.

PwC, which is the fastest growing and largest of the Big Four accounting and advisory firms, has responded immediately by setting up a board to check external audit quality. Ian McPhee will chair the new board, and will be joined by Margaret Abernethy and Damien Johnston.

Abernethy is a professor of accounting and presently the Sir Douglas Copland Chair of Commerce at the University of Melbourne. She has also been the Director of the Melbourne Centre for Corporate Governance and Regulation since 2017. She brings two decades of academic experience in accounting to the table.

Up until November this year, Johnston was the Chief Financial Officer at gambling entertainment company Tabcorp, a position he took up in 2011. At Tabcorp, Johnston worked with professionals from a variety of financial domains, including taxation specialists, investors and government relations professionals.

“We are proud to welcome three leading accounting experts as the inaugural members of our newly established audit quality advisory board which will provide an extra layer of external scrutiny over audit quality,” said PwC Australia Assurance managing partner Matt Graham.

“The board will have access to all information about the firm’s audit quality processes, report their views and recommendations publicly as part of our annual audit quality transparency report and provide input to the remuneration of audit partners as it relates to audit quality,” he added.

The move comes at a time when the ASIC is looking to tighten practices across Australia’s financial sector. The watchdog body recently developed a new set of non-financial risk standards to ensure compliance. The new board will help ensure quality in PwC’s output during this time of increased scrutiny.

“Quality audits are critical to a well-functioning and trusted financial system, and we are looking forward to working with PwC as it takes steps to further strengthen audit quality. By providing the firm with external and diverse perspectives, we hope to provide both counsel and challenge about how quality can continue to improve and help build trust in the audit more broadly,” said McPhee.