Kevin Burrowes Serving Two Masters: Meredith Beattie - You should be sorry’: Former PwC GC slammed for role in tax leaks
Inside the election of a PwC chief executive
The candidates had unofficial campaign managers and developed manifestos. Lobbying was done in the office, over drinks, during the weekend. And like any good election, the voters’ main concern was what was in it for them.
Tom Seymour’s pitch to partners to be elected as the next chief executive of PwC was simple. “It was ultimately vote for me, and I’ll make you more money,” recalls one insider.
It was 2020 and four candidates were vying for the $4 million job atop Australia’s biggest professional firm: the head of tax Seymour, chief operating officer Sean Gregory, head of clients Julie Coates and assurance partner Chris Dodds.
The firm’s governance board cut the shortlist to two, Seymour and Gregory, and what followed was a highly political process for choosing a new leader. Both candidates had unofficial campaign managers and developed manifestos. Lobbying was done in the office, over drinks and during the weekend. There was an official roadshow by the candidates. Capturing the block votes of entire teams of partners was a key strategy. And like any good election, the voters’ main concern was what was in it for them.
Partners voted upon tribal lines and a calculation of how either candidate would help them personally. In his report about PwC’s governance, Ziggy Switkowski was highly critical of the voting process. The “overwhelming perception” of partners is that the CEO appoints “trusted colleagues to key internal roles” and has ultimate power over the firm.
Also helping Seymour was the fact he had more runs on the board than anyone else. His financial advisory division, which included tax, law and deals, was the powerhouse within the firm. The remediation work triggered by the banking royal commission had been good for the entire consulting sector, especially the big four consulting firms. For partners, the promise that he could make the whole firm as successful as his division was too compelling to refuse.
Seymour won the vote and became chief executive the following week, on March 5, 2020. He was 49. Sayers left the firm and by the end of the year he had started his own firm. The Luke and Tom show was over.
The election could have been an opportunity for partners to reset PwC’s culture, but they never had a chance. In the fallout of the tax leaks scandal, it’s a failure now regretted by any partner who voted.
For years, the troubled tax division Seymour led had been locked in a war with the Tax Office over its aggressive advice and questionable use of legal privilege. PwC’s governance board had known about these problems for more than three years. Why did it allow Seymour to run at all?
For many in the wider partnership, the fateful election of Seymour was less a matter of being blinded by profit as being blindsided about problems that would, ultimately, prove existential to the firm. Yes, there were rumours about the “cowboys” in tax. But Alexander*, a former senior leader at the firm, says most partners simply had no visibility about the problems.
Inside the Tax Office, the reaction to Seymour becoming CEO was resignation. “It was like a cynical shrug of the shoulder,” says Jason*, who was familiar with the relationship between the firm and the agency. “They were so far off the rails, of course they elected Seymour.”
In part four of our special series, we reveal how a top tax officer tried to warn PwC about its tax problems – twice; how despite this red flag, Seymour was voted in as chief executive; and how the firm changed again under its new leader.
Jeremy Hirschhorn was nervous and exasperated. The Tax Office’s second commissioner had spent years trying to get PwC’s tax advisers to behave like the “systematically important” players they were. It hadn’t worked. It was August 2019, and he was now planning to tell the firm’s then CEO Luke Sayers about the many problems within the firm’s tax division.
It was a desperate move that followed earlier failed efforts to resolve the war between the big four firm and one of its main regulators.
From late 2016, Hirschhorn and other senior bureaucrats had held regular meetings with Seymour and the firm’s senior tax leaders in the ATO’s Sydney office to resolve the impasse between the organisations. They went like this:
Seymour would be “personable, friendly, very reassuring”. He would make “lots of promises of cooperation. He’d ask ‘what are you looking for?‘, and say ‘I don’t think there’s anything there’. He would assure the tax officials: ‘We’re partners, we want to be cooperating’ but also note ‘our clients are very worried’.”
“Tom was front and centre, Pete [Calleja] in the background and the other guys were dealing with the specifics. They were held late afternoon and went for ages.”
PwC’s leaders would repeatedly promise the tax officials: “We’ll get you everything you need.” To the ATO, the promises of co-operation, compliance and understanding, during those first years at least, often seemed to evaporate once the meetings ended.
Before he met Sayers, Hirschhorn went public with his concerns about the firm in 2019.
In mid-September 2019, he went on a speaking tour where he told groups of big four partners that their firms harboured a few arrogant partners who were disrupting the tax system with overly risky advice.
He might have delivered the speech to all the firms, but he was really targeting a few of PwC’s tax partners. His core message was they were not as smart as they thought they were and in the long run, their aggressive advice was bound to fail, given Australia’s general anti-avoidance regime.
These advisers were “overconfident in their own ideas and fail[ed] to put appropriate rigour in their technical analysis. This [led] to their clients taking positions which [were] (often significantly) riskier than they understand them to be,” Hirschhorn told the partners.
The second commissioner also told The Australian Financial Review at the time that “the partners we are most concerned with are often the ones who have in the past been perceived as the most successful partners. You would think as sophisticated consulting firms they would be good at risk assessment of their own operations, and looking at risk-adjusted profit. But it appears significant weight is put on simple revenue rather than risk-adjusted profit.”
This was a prescient insight. The horizon of a big four partner is the yearly partner profit cycle. The danger zone for tax advice can be five to ten years in the future.
What Hirschhorn was saying, and what no one at PwC seems to have understood, is that tax had a unique long-tail risk for the firm. Audit also has a long-tail risk, but its practitioners tend to be rule-abiding conservatives. It is also hard to sue in consulting because it is difficult to ascertain who is responsible when things go wrong.
Just two examples of PwC Australia tax advice that came undone years later include Orica (overruled 13 years after the original structure was put in place) and Chevron (14 years).
Or, as Jens Polls, an academic involved in creating new global ethics standards for tax advisers, stated in May: “The interpretation of some tax laws have changed dramatically, [so what was] seen by a court or a tax administration as acceptable some years ago, might not be seen as acceptable or even as legal nowadays.”
In that same speech, Hirschhorn made another prescient comment: “I note that, as in many spheres of life, a cover-up can have worse consequences than the original action.”
Hirschhorn finally spoke to Sayers about the firm’s tax division on August 28, 2019, in the ATO’s Sydney office. The tax official outlined a startling catalogue of concerns in the meeting.
The Tax Office official complained that the firm’s advisers were making “inappropriate legal professional claims” and committing “potential ‘promoter penalty’ activity in relation to a range of areas”, including the multinational anti-avoidance law, cross-currency interest rate swaps, research and development schemes and goods and services tax schemes.
There was more. Hirschhorn raised concerns that PwC’s advisers were “preparing responses for clients who had received ATO ’Request For Information (RFI) Notices” that were “false or misleading to the knowledge of the PwC staff involved” and that the firm was also helping clients involved in the “Foreign Investment Review Board approval processes” in a way that “had the potential to mislead or subvert those processes”.
Hirschhorn also says he raised “cultural issues within the tax practice of PwC, reflected in several senior partners’ attitude towards senior management within the firm, as well as the ATO and other regulators” and the inadequacy of “PwC’s risk structure to call out poor behaviours and practices”.
Within this cavalcade of concerns, the second commissioner also said the ATO was worried about the “breaching [of] the confidentiality of a Treasury consultation process and the apparent commercialisation of that breach”.
That was the only oblique reference in the meeting to now strong suspicions with the Tax Office that PwC’s then head of international tax, Peter Collins, had shared confidential government information with fellow partners. These were the leaks that, when made public, would damage PwC Australia. In any case, the tax officials felt it would have been illegal, due to strict taxpayer secrecy rules, to tell the firm directly about their suspicions at the time.
If all that wasn’t enough, Hirschhorn warned that professional bodies and overseas regulators might be interested in the firm’s activity, which he alleged could be seen as “potential breaches of professional duties and potential offshore offences such as breaching mandatory disclosure rules in the United States”.
Many of these behaviours had wide-ranging consequences. For instance, PwC’s minimalist approach to FIRB disclosure would lead to Treasury introducing, at the urging of the Tax Office, penalties for making false and misleading statements in FIRB applications. That is, the action of PwC’s tax advisers ended up making FIRB applications harder for everyone.
In a parliamentary hearing on Friday, Sayers, sitting side by side with Seymour, lost his temper when asked once again about this meeting. Sayers said he was not directly told about the Tax Office’s suspicion that Collins had been leaking confidential information. He raged that he had been “belted in the media for 15 months” over the incorrect allegation that he had been effectively warned about the Collins matter. He also said the Tax Office should have put it in writing and formally informed the firm about its suspicions about Collins and the other issues that Hirschhorn raised.
Sayers then resorted to name-calling during the inquiry. He said Hirschhorn had liked to “opine”, “wax lyrical” and “pontificate” on all sorts of subjects. In his meeting with the tax official, Sayers says Hirschhorn “absolutely did wax lyrical about a bunch of cultural things related, in my recollection, related to certain partners. One of those partners he’d thought mentioned was actually from another firm.”
Sayers said Hirschhorn “would have perspectives on all sorts of things. Perspectives on partners, perspective on emails, perspective on cultures, perspectives on global issues. But there was a formal process for the ATO investigating issues.”
In his mind, Hirschhorn was bringing up issues that had already been resolved within the tax division. “Two years earlier, Hirschhorn was absolutely right,” Sayers told parliament. “We had a handful of rogue people, their behaviour was egregious, we’d moved them out. And we got to work to try and fix the problem.”
Sayers has told associates that disagreements with regulators were a normal part of doing business, and that the ATO was often wrong. He also believes the ATO would have taken legal action if it really had a problem with the firm. Sayers, sitting side by side with Seymour, described him on Friday as a “high integrity leader” with a “20-year track record at PwC” and a “large followship through the firm, not just the tax business”. Privately, he will call Seymour “a good human”.
Despite Sayers’ dim view of Hirschhorn’s feedback, he passed it on to the firm’s governance board. Five days after the meeting, the board received an update on what the ATO official had told Sayers.
The minutes of the board meeting record: “Recent developments were outlined, including the substance of matters raised by the ATO in discussions last week with Luke Sayers about the culture in the firm’s Tax practice.”
That, in itself, should have been enough information for the governance board to investigate the Collins breaches. There were only a handful of tax advisers who sat on Treasury consultations. This was the moment, if any, to launch a full-blown internal investigation into how the firm’s tax division dealt with confidential information. But nothing more seems to have been done by the governance board. PwC’s legal report could not find records of any follow-up discussions by the board about the confidentiality issue at the time. The firm had looked into Collins’ activities in 2017 and 2019, and mistakenly concluded he had done nothing wrong.
There is another mystery here. It is how the governance board could have heard any reasonable summary of the issues Hirschhorn raised without going into a panic mode. The mystery is deepened by the fact that the governance board had been seeking regular updates from the executive board and broader business from October 2016 regarding concerns raised by the ATO about the tax practice around the 353s requests and related legal privilege claims, and the wider culture of the tax practice.
Some tentative steps had already been taken to increase oversight of the firm’s tax advisers. PwC had created a panel to review complex tax advice, introduced mandatory training for the advisers about complex tax advice and created an approval mechanism and annual training around providing tax advice as a legal service. It also put together a group, which included governance board members, to oversee the firm’s responses to the 353s.
But these moves were clearly not enough to stop Hirschhorn from directly briefing Sayers about the tax advisers. It is a hard truth of this saga that merely adding rules and training, and promising to change mean little if the wrong incentive structure – which in this case was to sell aggressive advice – remains.
It wasn’t until March 2020 – as Seymour took over as PwC chief executive – that the firm called a review into its tax division, via Bruce Quigley, a former ATO second commissioner. That is, the firm’s governance board commissioned an investigation into the tax practice despite knowing there were issues for almost four years. This all now appears to be too little, too late.
Those who were on the governance board at the time believe they took the steps required of them to manage the situation.
Some members of the governance board at that time remain at the firm. They include current PwC partners Paul Abbey (one of the original tax adviser Rovers), Paddy Carney (an assurance partner now also on the firm’s global governance board) and Tracey Kennair (an IT partner who became chairman of the board between July 2022 and May last year). The chairman at the time was former partner Peter Van Dongen.
Several former partners of the firm find it unbelievable that Sayers and the governance board didn’t realise how serious the problems were with the tax division – especially not to notice the time, expense and sheer manpower required to process the tens of thousands of documents involved in the 353 requests.
“I think the people close to him in a professional and business sense already know what they’re getting,” says a corporate insider, Peter*, who has worked with Sayers. “You get a highly connected, charming, thoughtful person who’s not the best on detail. He’s not a shafter, there’s nothing malicious about him. So many people in that position get vicious and vengeful.”
Sayers takes deep offence to the observation that he’s not good with detail. He tells associates that when he needs to, he can go deep into the details.
“There’s a big dose of jealousy,” Peter says. “This is a kid from a modest background with no discernible expertise but is really good at bringing people together and getting outcomes. But it leads to his greatest weakness, that he trusts the judgment of those around him rather than having great judgement himself.”
Sayers reached the end of his maximum eight years, or two terms, of leadership of PwC Australia in 2020. It was time to hand over the baton.
In February that year, Hirschhorn met Sayers again and the two discussed the firm’s coming CEO election.
Jason, who was familiar with the relationship between the firm and the ATO, says that was a major concern within the ATO that Seymour, a man they had been battling for years, could become CEO of the firm.
“The trigger was that a major player in the tax system [PwC Australia] was about to appoint someone who had engaged in poor behaviour as their CEO,” he says. “[The ATO] thought it could lead that firm to trouble down the track. All Hirschhorn was allowed to say was ‘We have these concerns, have a look’.”
Hirschhorn’s official timeline states that Sayers raised the election, to which the ATO official replied that it was not the ATO’s “role or appropriate to comment on election processes”. Instead, Hirschhorn says he told Sayers “the PwC board should ensure that it is fully abreast of the range of concerns the ATO has had with PwC tax group’s behaviour”.
Sayers has told parliament that he complied with Hirschhorn’s request and passed on the message to the board about the ATO’s concerns. The former CEO has told associates that his recollection is that Hirschhorn had told him that Seymour had grown in the role and now looked at taxation more systematically, in line with the ATO’s thinking. This is not the view within the ATO of the message that was delivered.
It is entirely possible that the men simply misunderstood each other.
The firm’s general counsel at the time, Meredith Beattie, has a differing version of what was told to the governance board. She had earlier fallen out with Seymour because she thought the tax advisers were incorrectly applying privilege and causing big problems for the firm with the Tax Office.
Beattie told parliament on Friday that her “understanding was that Mr Hirschhorn had said something along the lines to Mr Sayers that there [were] a number of issues that were likely to arise in relation to the tax practice, or parts of the tax practice, and that if Mr Seymour were to be CEO of the firm, that that could be problematic because then he would have to stand aside”.
The former general counsel told parliament on Friday she wanted to see “accountability” over the legal privilege issues because they had been “very damaging to the firm”. At the very least, she felt that the governance board, now briefed on Hirschhorn’s concerns, would not allow Seymour to become CEO and was surprised when he was allowed to continue through the process.
Some believe Sayers should have intervened, and aggressively so, to ensure Seymour could not become CEO. Others believe Sayers was in favour of Seymour becoming CEO. For his part, Sayers has told associates he interpreted the ATO message as saying Seymour had improved, not that he continued to be a problem. That was not the message the ATO was trying to deliver.
In any case, Sayers has told associates, there was no mechanism for him to intervene because the choice of candidates was a decision for the firm’s board. Others don’t buy this argument and note that if the senior partner at the time had expressed reservations – as effectively happened with Sayers in 2008 – they would have been taken into account by the governance board.
Alexander*, the former senior leader at the firm, says: “Luke’s big mistake is he didn’t control Tom. He trusted his mate. Luke was pushing hard for Tom to be CEO.”
As for the partners, they were told little about all of this high-level drama. The then chairman, Peter van Dongen prepared some extra words to tell partners about the Tax Office’s concerns but by the time it reached them, it was dressed up in so much jargon and management speak as to have any meaning.
An email of February 24, 2020, between van Dongen and a consultant at the firm details an additional slide the former inserted into a presentation he was planning to give to Brisbane partners about the vote.
The slide, titled “Increasing prevalence and complexity of multi-jurisdictional taxes”, explained how the firm had changed its approach to tax advice from “black letter law” to thinking about “what is morally right” and in the best interest of both the client and Australia, and noted “there remains a risk for our practice, along with other firms and the profession, as the ATO work[s] through back issues on the provision of advice and the use of legal professional privilege.” It ended with the assurance that “the Board has absolutely endorsed that both of these candidates are ready to lead our Firm”.
Seymour took over as CEO as COVID-19 took hold of the country. He cut partner pay, staff numbers and hours, and other costs. Post-COVID, Seymour was the first of the big four leaders to introduce pay transparency for staff, and he signed off on a $15 million staff retreat. He wanted PwC to be an employer of choice. His moves paid off this year when PwC’s gender pay gap fell within the neutral band of the Workplace Gender Equality Agency, by far the best result of any big four consulting firm. Seymour instinctively understood there were two key cohorts at the firm – the very young (the average age of staff is the late 20s) and the partners.
Under Seymour, problematic interpersonal behaviour by partners was dealt with more quickly. Allegations about a PwC partner holding male-only events with colleagues, where they rated the attractiveness of women in their office and visited strip clubs, were resolved within a few weeks. The partner in question, along with three staff members, was forced out of the firm and the other partners in that office were fined. They were also subjected to a lecture from Seymour about acceptable behaviour.
But he also didn’t like complainers. Rosannah*, the former IT consulting partner, says: “Tom’s way of courting followship was to smack you around a bit and then see how you reacted and then rebuild you. He didn’t like whingers. He assumed a level of resilience. You didn’t bring Luke bad news. But if you went to Tom with problems, you sure as shit needed to understand the right course and how we are going to get on with it.”
Aweek after Seymour was elected, the Tax Office made a big move. It formally kicked the Peter Collins case over to the Tax Practitioners Board, a once little-known agency that oversees Australia’s 80,000 tax agents. Its findings would trigger the tax leaks scandal and almost bring the firm down.
(*Current and former PwC staff still refuse to speak publicly against the firm, fearing it will affect their ongoing relationships, legal obligations and, often, their retirement benefits. It is an obsession with, ironically, confidentiality. All interviewees have requested that their names not be used. In place, we have used pseudonyms and, where required, short descriptions of the speaker.)
Part 5: The downfall
Read more about the PwC tax leaks scandal
Part one | ‘We couldn’t believe it’: Insiders reveal how PwC unravelled as scandal broke The inside story of how PwC transformed from dull accountant into a sales-driven firm that would tear itself apart.
Part two | The emails that almost destroyed PwC Australia Insiders thought it was a “joke” for PwC to both advise the government on tax reform while helping clients exploit those reforms. One meeting sent the Tax Office over the edge.
Part three | The Tax Office goes to war with Seymour as Sayers goes big While PwC tax divisions was mired in a paper war with the Tax Office, the firm transformed from a conservative accounting firm to hard-charging, hard-drinking financial services company.
‘Potential conflict’: PwC kept in the dark for a year on CEO pay Kevin Burrowes’ second role with PwC International was the focus of the joint parliamentary inquiry into consulting on Friday morning.
Chanticleer | PwC hasn’t paid full price for eight years of risk failure Exactly who deserves the most blame for the PwC scandal remains a subject of fierce debate. But it’s the systemic failures of risk management that really matter.
Opinion | Penitence, bravado and rattling the PwC can The firm’s alumni deploy the “I take full responsibility, it was all the other guy’s fault” defence.PwC leaders at war over tax scandal PwC’s former general counsel says she repeatedly advised then chief Luke Sayers and the governance board that legal professional privilege was being misused.
‘This may not end well for you’: The secret war behind the PwC inquiry Documents tabled by three federal agencies raise questions about whether the ATO tried to shut down the investigation into the PwC tax leaks and targeted the man leading it, Michael O’Neill.
How confidential tax information was shared at PwC At least six former PwC partners were involved in leaking confidential information from Treasury, the Tax Office and Board of Tax, legal reports concluded.
‘Shadow’ culture of profit first blamed for PwC tax leaks scandal A scathing report into the big four consultancy laid bare the brutal, uncompromising culture at the top that led to the firm’s tax leaks scandal.
‘Growth at all costs’: what PwC report found The mindset was said to have been “growth at all costs” with a spotlight on “revenue, revenue, revenue”.
‘We are deeply sorry for that behaviour and the culture’ The full text of the open letter from PwC Australia CEO Kevin Burrowes.
PwC partner leaked government tax plans to clients The former head of international tax for PwC Australia, Peter Collins, has been deregistered by the Tax Practitioners Board for dishonesty and for sharing confidential government briefings with PwC partners and clients.
AFR journalists win Gold Walkley for PwC story Neil Chenoweth and Edmund Tadros broke one of the biggest stories of the year, which ultimately led to the break-up of the accounting firm in Australia.
PS: UK 🇬🇧
Inside the race to run UK PwC
Candidates are lining up to take charge of one of Britain’s most powerful businesses
When political tensions run high and the House of Commons descends into infighting, leading executives like to emphasise that their world is different.
Populism has no place in professional life, they say. Such grubby electioneering is beneath the experts who manage the nation’s blue chip companies – and who do their books.
At PwC, about 1,000 partners will be hoping – perhaps nervously – that they are right. A leadership election is looming at the Big Four accountant’s UK practice, and the battle lines have already been drawn.
“Our job is to serve the brand, the business, for the future […] This firm is 175 years old. It’s all about legacy,” Kevin Ellis, the current holder of the position, told the Leadership Unplugged podcast last month.
However the 60-year-old is judged by history, his colleagues’ thoughts are already focused on who will replace him in charge of the partnership’s UK and Middle East offices.
The official shortlist of candidates is expected to be announced at the start of next month, after being finalised by an independent supervisory board made up of PwC partners.
Once it is published, the hustings process will begin. This is where hopeful contenders formally present their vision to voters, followed by an audience Q&A.
The process culminates in a vote by partners.
One clear favourite to win is Marissa Thomas, PwC UK’s chief operating officer. A lifer who has been with the firm since 1993, Thomas previously held two other management roles: head of tax and head of deals.
She’s understood to be campaigning on increasing profits shared between partners. This means raising revenue, but slashing costs where possible.
Thomas’s pledge will appeal to many UK partners whose income shrank last year after PwC spent millions on new technology and hiring additional partners.
These higher costs resulted in a drop in pay for PwC partners. They received payouts of £906,000 despite record revenues in 2023, having pocketed more than £1m in the previous year.
The second frontrunner is Marco Amitrano, PwC UK’s head of clients and markets.
Another career insider who has clocked more than 30 years at the firm, Amitrano is understood to be promising the opposite: further investment – such as AI and cloud technology – to fuel further growth.
Then there’s Laura Hinton, PwC UK’s tax leader and global relationship partner for FTSE 100 clients.
Described as an “outside bet, your dark horse”, Hinton is said to be hugely popular among voters because of her successful five-year run as PwC UK’s chief people officer.
She was one of the architects behind the company’s post-pandemic flexible working policy, which in 2021 allowed workers to choose their working hours and finish at lunchtimes on Fridays during summer months.
The final stand-out frontrunner is said to be Hemione Hudson, PwC UK’s head of audit. Some argue that Hudson’s position guarantees key votes within the firm’s audit division, who note it’s been nearly two decades since the business has been led by an auditor.
Ellis and his predecessor, Ian Powell, both rose through the ranks via PwC’s advisory practice.
All those involved have behaved themselves, but the election process undoubtedly has the potential to get ugly. Earlier this year, three of PwC’s US partners were stripped of their management roles for breaching election rules for the firm’s American practice. One was disqualified from the competition to run the US business.
PwC partners have been told to avoid spending too much time on the elections, with the firm keen on the vote taking place without distracting from day-to-day operations, according to a person familiar with the matter.
Some have argued that the election process was left too late. The winner is expected to be revealed in May, just weeks before incumbent Ellis will officially step down in June.
Instead, they believe the search for Ellis’s replacement should have coincided with the election of Mohamed Kande as PwC’s global chair last December.
It means that key questions around PwC UK’s next steps – from recruitment to investment – remain unanswered until a new leader is picked.
There will also be further uncertainty for colleagues and clients as the £16bn UK consulting market faces a year of stagnation, as retail, telecoms and pharmaceutical sectors reduce spending on consultants.
The global downturn in dealmaking will no doubt be a key priority for Ellis’s successor, who must figure out where the market is going and what services to focus on.
Weaker demand for advisory services has left Big Four firms overstaffed as clients cancelled projects and demanded lower fees in the face of economic uncertainty.
Last year, PwC responded by cutting up to 600 jobstargeted mainly at its advisory practice. However, more drastic measures may be required.
Deloitte is reportedly planning its biggest reorganisation in a decade, in which the firm will reduce itself down from five to four divisions.
The major cost-cutting measure is expected to simplify the business and allow partners to focus more on dealing with clients rather than managing staff.
Another key focus for PwC’s next leader will be improving audit quality.
The Financial Reporting Council last year dished out a record number of penalties for audit failures last year, including £7.5m to PwC over its work with defence company Babcock International and logistics giant Eddie Stobart.
The Big Four have sought to improve performance by dumping riskier clients onto challenger rivals, which in turn have been scrutinised over basic errors and unacceptable audits.
PwC’s investments last year into artificial intelligence-enabled chatbots to standardise and automate audit work will remove some of this pressure from partners.
Whoever takes over PwC’s UK operations will be faced with tough decisions about how much time and money to devote to the evolving area.
AI-enabled audits are not without their own regulatory risks either – internal checks and balances will need to be redrawn, especially with regulators so far being slow to take action.
There is also an ongoing debate within the Big Four about separating consulting and audit businesses, allowing consultants to take on more profitable work without having to worry about conflicts of interest.
Ellis has said that PwC previously considered the option soon after he was elected in 2016, but decided against it. EY’s failed $600m split last year, codenamed Project Everest, means that is unlikely to change that anytime soon.
However, the rationale behind EY’s abandoned break-up – attracting new funds to invest back into the business – will be hard to ignore.
And as recent private equity deals with accounting firms Grant Thornton and Baker Tilly show, there are plenty of investors wanting a piece of the market.
Fiona Czerniawska, chief executive and founder of Source Global Research, said: “If you were a partner looking to get elected in the current environment, you would need to have some strategies for how the firm, both in its parts – so consulting versus audit versus tax – but also as a whole, is going to find the money to be able to invest in technology in the way that clients expect.”
Grand plans may be at the heart of each candidate’s vision. But the partners making the choice are likely just praying that the fight stays clean.
