PwC’s tax division isn’t the only victim of the current scandal involving the misuse of government information. It questions the contribution of those in major accounting firms involved in consultation or standard-setting processes.
It’s often asked, usually in a cynical tone, what benefit the government gains by letting the fox inside the hen house or Dracula loose in the blood bank.
But niche areas of expertise such as accounting and audit standard-setting need input from people with experience with contemporary transactions observed in practice.
This requires engaging people working in firms who see transactions as audits are done. Firms are hired to help with the implementation of accounting standards.
That background is useful to better understand the challenges entities face when attempting to apply a new accounting standard.
Practitioners bridge the gap between theory and practical application. Not having them at the table means the real-life impact of a regulation may not always be as clear as it should be.
Where do these people who know things work? There will be a mix of people from corporate roles, academics and major and smaller accounting firms.
Government needs expertise from organisations that initiate transactions and people who can bring that knowledge to the table.
It is simply the cold, hard fact that in the world of international accounting standards, major accounting firms have the necessary expertise, networks and individuals that understand how accounting standards are applied both in the Australian context and across regulatory jurisdictions.
The same is true in the area of taxation. Most people respect they get privileged access to help governments develop laws that is in the public interest.
What the community saw in the matter involving Peter Collins and the tax division at PwC was an abuse of a process where trust was key. That is now having an impact on PwC more broadly as a firm and the broader accounting profession.
Governments can’t function properly without getting insight from people who work in large firms. The likes of Treasury secretary Steven Kennedy know that very well.
Only a mug would think that you could operate in this world with people who are completely independent of some kind of conflict in setting laws and regulations.
Let’s put this differently: what would happen if you just pull somebody off the street with no knowledge of tax or accounting and plonk them on a committee to set complex rules and regulations?
That person would be ‘independent’ but they would also have no idea.
READ MORE:
PwC and the mysterious role of ethics in accounting regulation
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