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The logo of accounting firm PricewaterhouseCoopers on a board at the St. Petersburg International Economic Forum in Russia, on June 6, 2019.MAXIM SHEMETOV/Reuters

Gus Carlson is a U.S.-based columnist for The Globe and Mail.

The most remarkable thing about the sale of PwC Australia’s government advisory business to private equity is not the fire-sale price – a measly one Australian dollar, or 87 cents. It’s that anyone would buy it at all.

This business, no matter what the brand, will be known forever as the product of a corporate culture that for three years enabled its audit practice to funnel confidential client information to its consulting practice to drum up business.

The fact this occurred halfway around the world should not provide any comfort. This was not some local fly-by-night operation. This was PwC, PricewaterhouseCoopers, one of the Big Four accounting firms, revered as beacons of integrity, trust and accountability.

This was also not a case of one or two bad apples spoiling the bunch. The company admitted that 76 current and former partners were linked to the scandal. That includes the former partner who was advising the Australian government and shared drafts of corporate tax avoidance laws for multinational companies with consulting colleagues, who then used the information to pitch clients.

And it wasn’t an isolated incident. The practice went on unchecked from 2014 to 2018. In one instance, consultants celebrated via e-mail about winning work thanks to the information provided by a tax partner.

To be sure, accounting scandals are nothing new. But such widespread fraud points up the competitive pressure – and temptation – to cross ethical lines in the name of revenue. It has become especially acute as consulting has become more lucrative than auditing for big firms, a central factor in the Arthur Andersen implosion that spawned Accenture.

But in a world where corporate boards and management teams beat their chests about new levels of governance excellence, how could this happen on such a large scale for so long without detection? Most observers might think, perhaps naively, that of all businesses, accounting firms would have highly evolved, hypervigilant structures of checks and balances to detect and defuse this sort of thing. If the people whose job it is to set standards of trust, accuracy and transparency can’t do it, who will?

In most countries there are external watchdogs that monitor such things, looking for signs of ethical shortcomings of internal firewalls and management oversight.

The findings there aren’t encouraging, either. For example, the Canadian Public Accountability Board, which oversees firms that audit publicly traded companies, said in the spring that problematic audits were on the rise at accounting firms. It found issues in a third of the audits it examined last year, up from 28 per cent in 2021.

Furthermore, and more troubling, it said one unnamed member of the Big Four had issues with 29 per cent of its inspected audits and had been told to develop a “quality action plan.”

For PwC Australia, its quality action plan began in May when it hived off its government business and appointed a separate board.

But the reputational damage was so severe, that wasn’t enough. When several key clients, including big pension funds and Australia’s central bank, vowed not to sign any new contracts with PwC, the company moved to sell the business, which accounted for about 20 per cent of revenue, or about $529-million.

PwC Australia’s acting chief executive, Kristin Stubbins, fell on her sword several times. She apologized to Parliament, saying, “We have failed the standards we set for ourselves as an organization,” and vowing to punish those involved. In an open letter, she wrote: “We had a culture at the time in our tax business that both allowed inappropriate behaviour and has not, until now, always properly held our leaders and those involved to account.”

The sale and the apology may still not be enough. The day after the deal with Allegro Funds was announced, a group of current and former PwC partners in Australia sent a letter to Ms. Stubbins saying her plan was “lacking in transparency, grossly inadequate, and potentially detrimental to the firm beyond repair.”

Adding to the crisis, the Australian Senate has launched an inquiry into the broader consulting sector, and the Treasury has referred the matter to police for criminal investigation.

It remains to be seen if Allegro really got a deal for spending a whole dollar on such a toxic asset. The bigger questions: How much will other accounting firms be stained by PwC’s reputational spatter? And what are they doing to ensure the same thing isn’t happening inside their shops?

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