Consultants need 'breaking up' to stop conflicts

A parliamentary inquiry scrutinising the NSW government's $1 billion spend on consultants has been told the Big Four firms should be split up to help prevent conflicts of interest.

The upper house inquiry is examining whether the government's extensive use of private consulting firms is delivering good outcomes for the people of NSW.

It comes after a high-profile tax scandal that embroiled professional services firm PwC this year, involving it passing on confidential federal government information to clients.

The Greens-chaired inquiry on Friday was told drastic action was needed to curb problems with consulting firms "walking two sides of the street" by working for the government and private clients in the same area.

Macquarie University Professor James Guthrie said new material was constantly being unearthed on issues with large consulting firms' public sector engagement.

"We argue for the breaking up of the auditing from consulting - a proper separation - because that will be the only way we can get around the conflicts of interest," he told the inquiry.

"We're arguing that all contractors to the NSW government should have to declare any conflicts of interest ... they have a finger in every pie and that's just become obvious."

Issues faced in Australia were part of a global problem as the Big Four - KPMG, PwC, EY and Deloitte - offshored up to 20 per cent of their workforce in India, Prof Guthrie said.

"They've got whole suburbs full of Indian kids, I assume, doing audit work," he said.

In submissions this month, Prof Guthrie said the nature of consulting firms was to maximise returns to partners, meaning they "regularly engage in unethical behaviour and an absence of regulation beyond self-regulation". 

"Few measures currently exist to prevent unethical behaviour by consulting firms," he wrote.

University of Wollongong senior lecturer Erin Twyford backed a "structural split" of the Big Four and urged a focus on rebuilding public service's capacity.

A public register of consulting firms' conflict of interests should also be established.

"That has to be made really transparent and accessible by every person," Ms Twyford told the inquiry.

Representatives from Chartered Accountants ANZ - a professional body for accountants - were quizzed by Greens MP Abigail Boyd over what it could do to curb "cascading" scandals in the industry.

CAANZ general counsel and corporate assurance group executive, Vanessa Chapman, said it wanted to boost fines on individual members to $250,000 in relation to "firm events".

"This will ... deal with matters which may not be able to attributed specifically to a partner," Ms Chapman said. 

Asked by Ms Boyd about the "shocking" findings of the Broderick report into culture at EY, Ms Chapman said "I would expect there will be serious introspection at EY".

The report, released this week, found evidence of bullying, sexual harassment and long working hours at the firm.

"It is concerning, it's tragic and the learnings need to be taken on board by all large professional services firms," Ms Chapman said. 

The Audit Office in March estimated NSW spent at least $1 billion on outsourced advice in the four years to 2021.  

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