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Yea, they have chosen their own ways, and their soul delighteth in their abominations. I also will choose their delusions, and will bring their fears upon them; because when I called, none did answer; when I spake, they did not hear.

 Isaiah 66, King James Version

I Sayer I Sayer I Sayer… did you hear the one about the Big Four head who wanted to split up his firm? Sunder it in twain, as the King James Version might render it. But he had to leave it intact. Then his successor came along and dropped the whole thing and it split apart anyway.

Luke Sayers, former head of PwC and prominent Melbourne Business Type, was finally given his moment under the grill by the Senate finance and public administration committee yesterday, to apologise for his role — limited, he says — in the Peter-John Collins tax information scandal, even though it occurred on his watch as CEO. It was down to “bad actor tax partners”, he said, not the “vast majority of people at PwC” who “are the highest calibre individuals”.

And in order to counter any perceptions that Sayers as CEO for most of the 2010s was an incurious bystander, he revealed that he’d devoted considerable effort to a plan to break up PwC in Australia by splitting its auditing arm from its consulting arm. PwC’s global management knocked the idea on the head back in 2019, he said, to address issues around conflict of interest.

This is no passing admission. The fundamental conflict of interest between the audit and consulting arms of the Big Four — created by the huge revenue their consulting arms generate from business for companies they’re also auditing — has been at the heart of concerns about audit quality here and elsewhere for many years.

It was a particular priority of former Australian Securities and Investments Commission head Greg Medcraft, who in 2017 called the Big Four business model “broken” because the firms were charging too little for audits and subsidising them with more lucrative consulting work, leading to a steady rise in poor quality audit outcomes.

Medcraft had the data to back up his claims, based on ASIC’s auditing of Big Four audits.

But at the time, the Big Four insisted Medcraft was wrong, and there was no conflict of interest in their combined audit/consultancy model. Among the defenders? One Luke Sayers.

Back in May 2018, Sayers admitted to The Australian Financial Review that there was a problem with big firms purchasing audit services based on price, not quality. But, according to reporter Edmund Tadros, who would later expose the tax leak scandal and set off the firestorm that has since engulfed the firm and its competitors, “[Sayers] insisted there was no impact on audit quality or independence and there was no case to break up the firms as is being considered in the UK”.

We now know that this was right before — or during — when Sayers was concerned enough about the conflict of interest to undertake what he described yesterday as “nine to 12 months of detailed work” to develop a hard proposal for the breaking-up of his firm.

As Labor’s Deborah O’Neill pointed out yesterday, PwC also made a submission to a 2019 Senate inquiry opposing the idea of splitting up Big Four firms.

In light of that, can we believe anything Sayers, or Big Four CEOs generally, tell the media or Senate inquiries — particularly their bland assurances about how they handle conflicts of interest? PwC has now hived off its public sector consulting arm for $1 (Sayers thought he could split the whole consultancy arm, including private consulting work, for $1 billion), but it and the rest of the Big Four maintain the conflicted business model of auditing firms with which they have lucrative consulting contracts. The problems Medcraft warned about remain.

Perhaps it’s time for a lesson from the book of I, Sayers to be implemented: let them all be cleft in twain. “For all those things hath mine hand made, and all those things have been, saith the Lord: but to this man will I look, even to him that is poor and of a contrite spirit, and trembleth at my word.”