Liability arrangements for large consulting firms

Question

Senator BARBARA POCOCK: You think that belongs to the revenue group. I will do that. I'm sure you're aware that the big four operate with the benefit of limited liability via the Professional Standards Act, which provides firm-wide liability caps and insurance, reducing damages to a maximum of around $1,000 a partner by the time it's all boiled down across a partnership-that is, they are doing millions of dollars of consulting work and of course audit work as well, but mostly consulting work, with the possibility of only a damage liability of $1,000. The price of an iPhone, basically. Are you concerned, in Treasury and in this division, that the combination of the big four's avoidance and exclusion from the 20-partner cap in corporations law and their limited liability, by that Professional Standards Act, lets them operate as de facto corporations that are untaxed and unaccountable and very difficult to sue when they go off the rails? Mr J Kelly: As the minister and other people have said today, we're very concerned about some of the behaviours of these firms. I would have to take it on notice whether we've done any specific work on the Professional Standards Council. That's a good question, so we'll take that on notice. Senator BARBARA POCOCK: Thank you. For me it's a competition question. Many, many small consultancy firms do not have the protection of that form of liability protection. They are have no capped liability. That liability protection flows well beyond the 20 per cent of the audit business to all of the consultancy work, and that is an extremely unfair way of treating the system, so I would really like to hear your opinion on that. You say you don't have any work on that under way at present? Mr Quinlivan: We will have to take it on notice.

Answer

See attached response.

Documents

• Question with answer (PDF) (opens in a new tab)
• SQ26-000449 BET134 - Liability arrangements for large consulting firms.pdf (opens in a new tab)