Major accounting firms in the firing line of a parliamentary inquiry into the quality of their work have had an early win.
In a highly unusual move, the time for submissions to the inquiry has been pushed out from eight weeks to 12 weeks.
The change was requested after “stakeholders approached” a member of the committee, Liberal MP Jason Falinski.
The change was quietly made on the Parliamentary Joint Committee’s website on Wednesday afternoon, following a committee meeting.
There were no formal requests for an extension made to the committee and Mr Falinski declined to comment or give any information as to who the stakeholders were.
The major accounting firms declined to comment or failed to return calls.
Chairman of the committee, Liberal senator James Paterson, said he did not know who had requested the changes, but agreed to grant the extension from September to October 28.
“As committee chair I want to ensure maximum participation in the inquiry,” he said.
“Given we are not reporting until March 2020 the short extension to the submissions deadline is reasonable.”
However, it reduces the time available for public inquiry by a month, leaving just five months for hearings, the Christmas break over December and January and the drafting of the report and recommendations.
Labor senator’s transparency concerns
There are also concerns that the extension may make it easier for firms to reclassify documents, making the information privileged and unavailable to the inquiry, thereby potentially undermining it.
Labor senator Deborah O’Neill, the key force behind the inquiry, said she was concerned about the lack of transparency around granting the extension.
“I’m concerned that there should be no further delays to the inquiry in the quality of audit in Australia,” Senator O’Neill told the ABC.
She questions why an extension would be necessary for companies like EY, KPMG, PwC and Deloitte.
“It would be well within their capacity to deliver a submission to the inquiry within eight weeks and I would be disappointed if they don’t keep to the original deadline.”
Senator Deborah O’Neill says there should be no further delays to the inquiry. (ABC News: Matt Roberts)
The inquiry into auditing was established amid concerns that some companies on the ASX 200 may be at risk of an Enron-style collapse, given the, in some cases shoddy, and in other cases conflicted, work done by accounting firms.
Enron collapsed spectacularly in 2001, destroying $74 billion in investors’ funds, after its auditor Arthur Anderson gave its accounts a clean bill of health.
Earlier this year, the corporate regulator ASIC found almost a quarter of audits done in 2018 failed to ensure the company’s financial report was free from material misstatement.
In a review of the audit files of the six largest accounting firms, 20 per cent failed.
The broad-ranging parliamentary inquiry will examine the relationship between auditing and consulting, and potential conflicts of interest between these services.
A similar inquiry in the United Kingdom recently wrapped up and is looking at banning accounting firms from auditing the same companies they also do lucrative consulting work for.