Treasury Laws Amendment (Financial Reporting System Reform) Bill 2026
Senator BARBARA POCOCK (South Australia) (13:01): I rise to speak to the Treasury Laws Amendment (Financial Reporting System Reform) Bill 2026 . The Greens support reform that strengthens Australia's financial reporting systems and improves public confidence in our markets. This bill merges the Financial Reporting Council, the Australian Accounting Standards Board and the Auditing and Assurance Standards Board into a single entity called External Reporting Australia.
External Reporting Australia will have responsibility for accounting, auditing, assurance and sustainability standards. The Greens have consistently argued that strong institutions are one of the foundations of a healthy democracy. Whether we're talking about anticorruption bodies, environmental regulators or financial reporting standards, independence matters in all of those cases, and, while the Greens generally support the merging of these financial bodies, the new External Reporting Australia should be stronger, not weaker, than its predecessors.
That is why I'm proud to say that the Greens secured valuable amendments in negotiation with the government to strengthen the new ERA. The Greens are moving amendments to strengthen the independence of External Reporting Australia—the new body—and its sub-bodies, and this bill establishes those bodies to set auditing and accounting standards. As drafted by the government, the bill does not adequately prevent representatives of the large auditing and consulting firms from sitting on External Reporting Australia's governing council or its standard-setting boards.
It does not keep the fox out of the henhouse. This is a significant conflict of interest. These are the very firms whose conduct is shaped by the standards being set.
Our amendments introduce the concept of an External Reporting Australia eligible representative. An eligible representative is not a big-four fox with a financial interest in a firm covered by these standards. The amendments define who may be appointed to these governance bodies by explicitly excluding current partners and directors of major auditing firms and former partners or directors who continue to receive material benefits from or are holding shares in those firms.
This is the same principle that the Greens successfully applied to the Tax Practitioners Board, where we secured amendments to minimise conflicts of interest by restricting the appointment to the TPB of individuals with direct financial ties to consulting firms like the big four. Regulators and standard setters must be genuinely financially independent of the industries they oversee.
This is very important in a regulator like the Tax Practitioners Board, which currently has an investigation into the unethical behaviour of KPMG. The current Chair of the TPB, Mr Peter de Cure, was, for 25 years, a partner in KPMG and, of course, should not have any role in an investigation of his old firm. Accountability in financial reporting starts with the integrity of the institutions responsible for setting the rules.
I'll note that the government insisted that our amendment, if it was to pass, must include a carve-out to this new eligibility criteria for the New Zealand cross appointment to External Reporting Australia. The current Chair of the External Reporting Board, XRB, in New Zealand is Mr John Kensington, who is also a financial services audit partner at KPMG in Auckland.
Because of Labor's lack of courage, he will be the New Zealand appointment to External Reporting Australia—a New Zealand fox from KPMG will enter this henhouse by that means. This is a real concern given KPMG Australia and KPMG International's numerous ethical failures in misusing confidential client information to win lucrative audit contracts and to fail to attend to—indeed, to isolate and punish—the brave whistleblower who brought their misdemeanours to our attention.
I'm deeply disappointed that we couldn't keep New Zealand partners, and former partners, with ongoing financial interests in the big four out of these new standard-setting institutions, but we can at least rest easy at night knowing the Australian appointments will not have these conflicted ties to the big four from within our country. If you wouldn't let a poker player cut the deck, you shouldn't let the big four write the rules they're audited against.
It's a simple rule. It passes every pub test. The Labor chaired Parliamentary Joint Committee on Corporations and Financial Services consulting inquiry report stated that there is 'potential for the big four audit firms' to 'exert undue influence' over the three bodies that are being merged by this bill.
It must be prevented. Evidence from Associate Professor Corinne Cortese to that inquiry showed that at the time of the inquiry, incredibly, 40 per cent of Financial Reporting Council members and 50 per cent of Australian Accounting Standards Board members had ties to the big four firms and that six of the 11 Australian Audit and Assurance Standards Board members were partners in the big four firms.
Despite this clear conflict of interest being raised years ago, measures to prevent this undue influence when merging these three bodies into the new External Reporting Australia are not included in this bill. The Labor chaired committee also recommended that this new entity 'not include individuals with a current financial interest in entities under the direct governance of the body'.
It's very simple. Don't give membership of the regulator itself, or the standard setter itself, to people with a financial interest in what is being regulated. Despite this recommendation being agreed by Labor, the Liberals, the Greens, everyone in this chamber and members of the committee, Labor did not make this a requirement in this act.
Why ever not? The government should have learned the lessons from the consulting inquiries when designing the appointment criteria for the ERA. The Greens have also secured an amendment to the bill that adds ethics to the list of fields that the minister is satisfied that appointees to the Governing Council and standards-setting boards have.
They have to have shown evidence that they know how to behave ethically. This is something that was raised by stakeholders throughout the inquiry process. In the wake of the evidence of unethical behaviour exposed by the two parliamentary committee inquiries following the PwC scandal and, now, the KPMG audit scandal, there is no doubt about the need to put in place structures, standards and processes that will lift the ethical standards of tax advisers, auditors, accountants and consultants.
We've also secured an amendment to ensure a public interest consideration when adopting international standards. As drafted, External Reporting Australia is required to act in the best interests of the public and private sectors of the Australian economy, but not in the public interest as well, which goes beyond considerations that just benefit the economy. Stakeholders observed that External Reporting Australia should also be required to act in the public interest.
When I asked Treasury, in estimates, whether they considered requiring the new body to act in the public interest, their response showed that the government was focused on consolidating existing frameworks but not improving them. These three amendments have helped strengthen this bill, but there remains much more to do. I listened to Senator Canavan's defence of his old firm, KPMG, and I remain unconvinced.
As we stand here debating this bill, the KPMG audit scandal rolls on. It is the senior leadership of KPMG which have let down the thousands of people who work in KPMG. Many of them are good people.
It is their senior leadership which has contaminated the reputation of people in KPMG, including people like you, Senator Canavan, who've worked in KPMG. KPMG's name is now viewed differently by the Australian public because of repetitive examples of ethical failure, of cheating on exams, of using confidential audit information to generate other audit business.
These are indefensible errors by the leadership of KPMG, which is in receipt of over $640 million of public sector money. It is a firm that last year brought in $2.3 billion of revenue. It deserves to be accountable.
Its senior leadership need to be accountable. Senior partners used confidential information to win very, very lucrative audit work. They breached audit independence, a central pillar of our financial system.
There are multiple instances of massive cheating by KPMG workers, who are in a culture which encourages and permits that cheating. We know that they've lied to the Senate. They've lied to us about power mapping of opportunities in the public sector.
They stood in our Senate committee and told us they didn't do it, and then we had numerous examples of very specific mapping of relationships, which they farm to win further contracts. So there's lying to the Senate about power mapping, and then, on 19 June, lying to a Senate committee, a parliamentary committee, about the fact that they had conducted so-called investigations in relation to the current whistleblower.
There were no such investigations underway; there was simply legal advice sought by KPMG, which they wanted to masquerade as investigations, and meanwhile they isolated and punished the whistleblower. We've seen overcharging in Defence, with many, many, many millions and indeed billions of dollars being raked in by KPMG and their mistreatment and harassment of multiple whistleblowers.
These are patterns of behaviour in KPMG; they are not bad apples. We've seen them attempting to use legal professional privilege to obscure the work of this parliament and not notifying the Department of Finance of recent developments and incidents as required by their contractual obligations. These are not one-off events.
These are multiple events over years. They infect KPMG, and they no doubt cause great dismay to the good people within that firm. There are too many people affected by a very poor culture at the most senior level.
This is the same morally bankrupt KPMG who are continuing to run ethics and leadership training for senior public servants. KPMG could run a great leadership class in unethical leadership—how to monetise confidential information, how to cover things up, how to isolate and harass a whistleblower. Our most senior public sector leaders should not be undertaking any form of training, let alone on ethics and leadership, from a firm that has, by its own admission, breached the most basic ethical values and whose leadership has failed, whose leadership has departed, whose leadership will no doubt suffer further losses.
Labor must give us what we need here, which is the real change that meets the outrage of ordinary Australians. I want to conclude by going to some significant reform areas that we must see. We need to see the implementation of all of the recommendations of the previous parliamentary inquiries which reform the auditing, assurance and consulting sectors.
That is why I am moving a second reading amendment to this bill, reminding this parliament of the work that still needs to be done. I move: At the end of the motion, add ", but the Senate: (a) notes that: (i) this Parliament has united in condemning the countless ethical failures shown through the PricewaterhouseCoopers tax leaks and KPMG audit scandals, (ii) it has almost been two years since two parliamentary committees published tripartisan recommendations to reform the auditing, assurance and consulting sectors, and most of those recommendations have not yet been implemented, and (iii) Australians demand action to prevent scandals like these from happening again; and (b) calls on the Government to: (i) properly regulate partnerships and the auditing, assurance and consulting sectors, and provide increased protection to whistleblowers, and (ii) act on all 52 tripartisan recommendations in the Parliamentary Joint Committee on Corporations and Financial Services report on 'Ethics and Professional Accountability: Structural Challenges in the Audit, Assurance and Consultancy Industry' and the Finance and Public Administration References Committee report on 'Management and assurance of integrity by consulting services'".
These reports gave the government a comprehensive blueprint for action, with clear recommendations on lowering partnership caps, requiring large entities like the big four to meet the same tax, transparency and insurance obligations as big corporations; requiring separation of audit from non-audit consulting services; improving whistleblower protections; and not allowing PwC or KPMG to tender for government work until all ongoing investigations have concluded.
This Labor government needs to stop dragging its feet with endless reviews and consultation and decisively act on broader sector reform. This is what we need. This is what the Australian people expect.
We have the evidence, we have the recommendations, and we have the agreement across this outraged parliament that we need to meet the moment. Labor must meet this moment. The Greens have five key priority areas for reforming these broken sectors: closing the regulatory gap, breaking up these very big firms, banning unethical contractors from government work and increasing penalties—the penalties suffered by these firms and the individuals within them, who have behaved appallingly, are trivial relative to their income, so we need to increase the penalties for egregious bad behaviour and ethical failures—and an ethical and legal regime around contracting.
We need to support and protect whistleblowers. There is no argument that we need to make sure all entities are required to meet the whistleblowing protections of the Corporations Act 2001. We must establish, most importantly, a whistleblower authority that backs in the brave individuals who put themselves, their families, their incomes and their whole reputations on the line to bring forward their issues, as in this most recent case, to the Senate.
They should not have to do that. They should have leadership in place in their firms that listens to whistleblowers, understands the obligations of a very large firm and, indeed, meets the requirements of the Corporations Act. That is what we need.
We need a basket of reforms that go to the structural questions before us. We thank the government for their constructive engagement on this bill. It's been a really interesting, long discussion, but the fight doesn't stop there.
We are going to keep pushing for real reforms, transparency and accountability in audit, consulting and accounting sectors. There are many things this parliament needs to do. The mountain of evidence is there.
We must properly regulate these marauding cowboys, ban unethical contractors, structurally separate audit from non-audit, increase penalties and protect whistleblowers. That is our task now. Bills like this should reflect it, and further bills must come forward to do the work that remains before us.