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PwC Australia asset sale unlikely to repair reputation

The logo of accounting firm PricewaterhouseCoopers (PwC) is seen on a board at the St. Petersburg In... The logo of accounting firm PricewaterhouseCoopers (PwC) is seen on a board at the St. Petersburg International Economic Forum (SPIEF), Russia, June 6, 2019. REUTERS/Maxim Shemetov
The logo of accounting firm PricewaterhouseCoopers (PwC) is seen on a board at the St. Petersburg In... The logo of accounting firm PricewaterhouseCoopers (PwC) is seen on a board at the St. Petersburg International Economic Forum (SPIEF), Russia, June 6, 2019. REUTERS/Maxim Shemetov

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PwC Australia’s sale of its government consulting business may temporarily ease its tax practice crisis, but experts say it won’t fix its terrible reputation in the country.

PwC sold the division to Allegro Funds for A$1 ($0.67) to restore trust and save employment on Sunday.

However, a person with intimate knowledge of the situation said division partners pursued the divorce to save their livelihoods from a tarnished brand frozen out of government contracts. Since they weren’t authorized to speak, they couldn’t be named.

PwC’s brand has been harmed by the news that a former partner disclosed classified government measures to curb tax dodging with colleagues and used them to pitch international firms for work.

According to Allan Fels, a former head of Australia’s competition watchdog, the departure of public sector partners could prompt others to follow. Three parliamentary committees, including one announced on Friday, and police and two tax authorities are investigating the issue.

“The sale does not resolve the issues of past behaviour, including possible criminal action,” he told Reuters. Staff will think, “The firm’s reputation has been damaged and will affect my part of the business.”

No reaction from PwC. Fels has long advocated for the “big four” to divide audit and advice to prevent advising from compromising audit.

The spin-off shows how regulators and politicians press PwC’s partners and staff, the firm’s most valuable assets.

PwC acting CEO Kristin Stubbins told a state assembly hearing on Monday that the firm will not gain from a sale that will lose a fifth of its revenues.

Six months after tax authorities first announced the PwC breach, questions linger concerning the staff and clients implicated, and several government organizations, public bodies, and pension funds have frozen connections with the firm.

Allegro Funds will rebrand its purchase and select a mostly independent board, but PwC will keep the scandal-tainted tax practice.

Despite the “purification ritual” sale to Allegro Funds, Professor Clinton Free, who teaches management accounting, fraud, and governance at the University of Sydney, predicted the taint would spread.

“That would see a further loss in revenue and profit elsewhere due to the brand impact as clients walk away,” he said.

The firm has been told by the two senators leading the federal government inquiry that the sale will not absolve guilt.

“It is beyond plausible that PwC think they can just phoenix their way out of the deep cultural failures that are a matter of record and remain unresolved,” said Labor Senator Deborah O’Neill.


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