This view is in stark contrast to thecorporate regulator, which has repeatedly raised concerns about audit quality. The Australian Securities and Investments Commission’s latest Audit Inspection Program results, based on examining almost 100 risk-targeted audits to asses quality, found there wasinadequate evidence behind the findings of one in five reviewed audits.
The joint committee on corporations and financial services has also expressed “ongoing concern” about the “deep-rooted problems in the audit market”, particularly around the services provided by the big four firms Deloitte, EY, KPMG and PwC. The committee has flagged a “serious review” into the audit market in addition to asking ASIC to develop a new way to measure audit quality that produced results that are comparable over time.
“I retired from PwC on 30 June 2014, and no longer work for the firm,” Mr Edge wrote in an email to theFinancial Reviewon Friday.
“Some of my retirement income derives from a PwC partner retirement plan. The terms of this retirement plan were set before I joined the partnership, and these retirement payments have not been impacted by the profitability or performance of the firm.”
On Monday, he said that “everyone knows I’m a retired partner from PwC”. He declined to reveal the quantum of the PwC payment.
He said the payment was a fixed amount based on a “pre-determined calculation” and repeated the assertion there was no link between his retirement payment and the financial performance of the firm.
A spokeswoman for PwC said that “equity partners are entitled to receive payments once they retire from the firm as part of a retirement plan”.
“The details of this plan are put in place when an individual becomes an equity partner of the firm,” she said.
“The amount retired partners receive is not a percentage of profits and has not been impacted by the profitability or performance of the firm.
“Retired equity partners have no requirement to perform or contribute to the firm post their retirement.”
PwC has the largest auditing practice of any of the big four. The firm’s auditing work generated $409 million, or 17 per cent of its total revenue of $2.35 billion, last financial year.
The FRC’s rules require that any potential conflicts of interest should be declared to “other members” of the council and related bodies.
Asked if he had declared the ongoing retirement payment, Mr Edge replied: “No, I don’t believe so.”
A spokesman for Assistant Treasurer Stuart Robert said the government had been told about Mr Edge’s investments in a written declaration at the time of his appointment. Although Mr Robert describes the payments as “superannuation”, the PwC spokeswoman said they were payments from the firm and not superannuation payments.
“Mr Edge advised he receives some retirement income from a retirement fund administered by PwC,” the spokesman for Mr Robert said.
“These payments are superannuation payments: they are made in light of Mr Edge’s service with the firm prior to his retirement.
“The payments are not contingent on services being provided by Mr Edge to PwC since his retirement nor are they dependent on PwC’s performance. These payments therefore are not relevant to Mr Edge’s position of chair of the FRC.”
Oversight and advice
The FRC is is responsible for overseeing the financial reporting framework in Australia and its key functions include the oversight of the accounting and auditing standard and providing the government advice about its assessment of audit quality.
The council also recommend appointments to the Australian Accounting Standards Board, which develops accounting and financial reporting standards, and the Auditing and Assurance Standards Board, which develops auditing and assurance standards.
Late last year, the Morrison government asked the FRC year to review the disciplinary regime for company auditors operated by ASIC and professional accounting bodies including Chartered Accountants ANZ.
Global PwC role
Mr Edge was a partner at PwC for 18 years before retiring in 2014. In his last eight years at the firm, he led its “Risk and Quality Group”, which was responsible for risk management and quality control, according this is biography on the FRC website.
“He served on PwC’s Global and Asian Risk and Quality Leadership Teams. He also spent six years leading the PwC Australian Professional Standards Group responsible for the firm’s financial reporting and auditing policies and advice.”
A 2014 media release from the then-acting assistant treasurer, Mathias Cormann, announced that Mr Edge would be appointed as a member of the FRC.
“Mr Bill Edge will represent the Institute of Chartered Accountants Australia on the Financial Reporting Council,” the statement read.
“Mr Edge brings over 30 years of experience in accounting and auditing, including over 18 years with PricewaterhouseCoopers. Mr Edge has been appointed until 28 July 2019.”
In 2016, the then-assistant minister to the treasurer, Alex Hawke, announced that Mr Edge would become the part-time chair of the FRC until 28 July 2019.