APRA’s use of Oliver Wyman condemned as ‘waste of money’

The Australian Prudential Regulation Authority’s (APRA’s) use of consultancy Oliver Wyman to assist in the 2018 review of the Commonwealth Bank’s culture, governance and accountability has been condemned as a “waste of money” by former Australian Competition and Consumer Commission chair, Graeme Samuel.

In a no-nonsense submission to the Parliamentary Inquiry into the use of major consultancies such as PWC, Samuel made clear his view that the Australian Public Service had been wrong to rely so much on external consultants.

The former ACCC chair detailed the numerous reviews with which he had been involved making clear that, with one exception, none had involved the engagement of major external consulting firms.

“I have listed all these Reviews because, with one notable exception – the APRA commissioned Review of the culture, governance and accountability of the Commonwealth Bank – APRA insisted on engaging Oliver Wyman to assist in the conduct of the Review, which proved to be a waste of money – none involved the engagement of major external consulting firms. In certain cases, specific experts were engaged to provide input on matters requiring special subject expertise,” Samuel said.

He said it had long been his view that major accounting firms should not be conducting both audit and advisory roles for the same client and he believed such a prohibition should encompass the global associates of those firms.

“The response from the accounting firms has been that Chinese Walls are in place to mitigate the conflicts. And then it is argued that the knowledge gained by performing one role will assist in the quality of the performance of the other role – in other words that the Chinese Wall needs several discrete holes to permit the interflow of information!” Samuel said.

“It is impossible to erect an effective impenetrable Chinese Wall between departments of the same firm. Each of the audit and advisory arms must be aware of the audit or advisory relationship. The annual accounts will clearly reflect the audit relationship, and it would be surprising indeed if, in the conduct of a comprehensive audit, those involved did not become aware of the advisory relationship.”

Samuel pointed to the fact that the Parliamentary Committee had been urged to require the major accounting firms to split their audit and advisory practices into two separate firms but said he regarded this as extraordinary over-reach.

“A far simpler and achievable resolution to the conflict dilemma would be to prohibit a firm (and its associates) from providing remunerated services to the same corporation (and its associates) which the firm is auditing. While that could be an Australian regulatory requirement, it would apply in Australia if the global firm satisfied the prohibited criteria. Interestingly, this regulatory requirement should simply result in advisory mandates being redistributed amongst the accounting firms,” he said.