Fallout from a tax scandal lingers over the top end of town as the skills shortage becomes endemic.
The past 12 months could be considered a period for professional services firms in Western Australia to reset, particularly those in the accounting sphere.
The battle for talent has become a case of the devil you know, meaning it remains a headline issue but is better understood and accepted than at this time last year.
There’s been little change in terms of scale for WA’s biggest firms by number of staff, according to a newly revamped list compiled via Data & Insights.
Deloitte remains the largest accounting firm in WA by a considerable margin, with about 1,088 staff, including 81 partners.
Behind Deloitte at number two was EY, with 858 staff, including 54 partners.
Outside WA, the professional services behemoth had been due to embark on a major shakeup this year by separating its audit and consulting divisions.
However, Project Everest, as it was named, was not to be, and the plan was called off in April 2023.
This marked one of two headline events in the accounting world during the past 12 months.
News of the impropriety, which broke in January 2023, thrust the firm’s governance failings into the spotlight and sent shockwaves through corporate Australia.
It triggered a significant response from the federal government, was referred for a criminal investigation by the Australian Federal Police and was the subject of a parliamentary inquiry.
“The PwC scandal exposed severe shortcomings in our regulatory frameworks that were largely ignored by the Coalition, and today we’re taking significant steps to clean up the mess,” a media release from Treasurer Jim Chalmers said in August.
“We’re cracking down on misconduct to rebuild people’s faith in the systems and structures that keep our tax system and capital markets strong.
“By increasing penalties, giving regulators stronger teeth to investigate and prosecute perpetrators, and boosting transparency, collaboration and coordination within government, we are acting to restore public confidence and help prevent this from happening again.”
Former Telstra chief executive Ziggy Switkowski led an independent review of PwC in the wake of the news, and the firm has apologised.
But the true extent of the implications for PwC have yet to play out, and the scandal has had a negative reputational effect on the big four firms.
University of Western Australia finance professor Raymond Da Silva Rosa explained that, while the model for professional services firms as a one-stop shop was effective, trust was a crucial element.
“If you know something about one company or if you’ve worked on the company’s accounting return, it becomes easier to offer a consulting service because you’re familiar with the firm’s business model,” Professor Da Silva Rosa said.
“That’s all kind of standard … the issue firms have then is managing these different services within themselves, dividing the work up and allocating their rewards.”
He said clients and government relied on professional services firms to work in their (clients’) best interest and be trusted with sometimes-competing functions.
“If the trust is there [it] works really well, the model really works well,” Professor Da Silva Rosa told Business News.
Once that licence had been breached, however, trust was lost, he said; however, the overall operating model was still effective.
“People say this is the end of all professional services firms and my point is, no, it’s not,” Professor Da Silva Rosa said.
“That system, when trust is established and maintained, in a good way, it works really well for everyone, because there are lots of efficiencies.
“But if one firm ruins it, then it’s bad for that firm and there’s a little bit of collateral damage.”
Announced in June, the sale of PwC’s state and federal consulting business to private equity group Allegro Funds (for $1) was the first major outcome of the tax scandal.
The new public sector firm, renamed Scyne Advisory, will reportedly include more than 100 former PwC partners, including at least six in WA, with Perth-based Tricia Tebbutt selected as the local lead.
“We have identified and have accepted many of the failures that occurred,” Ms Tremain said.
“We’ve begun to chart our path forward, and our vision is to become the leading professional services firm, built on the highest ethical and professional standards with integrity at our core; a firm that delivers purposeful and sustained outcomes in everything we do.”
Speaking to general observations on the local market, however, there was more to be upbeat about.
Ms Tremain highlighted the benefits of WA’s economic resilience, but acknowledged familiar issues remained a barrier to capitalising on new opportunities.
“We’ve observed a general optimism from the WA business community,” Ms Tremain said.
“We are not the east coast, and some of the economic pressures and headwinds starting to emanate on the eastern seaboard are not felt to the same extent here. This gives us something of a competitive advantage that we need to seize on.
“The challenge for Perth and WA remains the burning need to diversify our economy so we can reach new heights and ensure we can get the structures right that address skills and labour shortages that stand in the way of us reaching our economic potential.
“At PwC Australia, we know that our people are our greatest asset, which is why we continue to invest in their experience in the workplace and their career and development opportunities.”
Skills shortages remain among the most pressing challenges for the accounting sector.
“There hasn’t been any pare back in demand, but from a supply point of view I think they’ve [professional services firms] struggled,” UWA’s Warrick Van Zyl told Business News.
“They do present great opportunities, it’s a very good way to learn quickly for someone looking to accelerate careers from a very young age, they still do that really well,” Associate Professor Van Zyl said.
“The current youth coming through … I think they’re often looking for aspirational visionary careers; accountants don’t always fit that profile well.”
Grappling with this challenge locally has become slightly easier to deal with, according to RSM managing partner Perth Alasdair Whyte, who said the past few years had been some of the most challenging of his career.
“It’s been a little bit less eventful this year for RSM,” he said.
“We’ve been able to focus more on what our clients need, and what the people need in terms of their personal development [rather] than the hustle and bustle of recruitment and retention.”
Continuing to recruit and train graduates remains a focus for RSM, which sits as the fifth largest by staff numbers, according to Data & Insights.
“We’ve taken about fifty people in the year to date over the past twelve months statewide in graduates and we anticipate maintaining that level of investment, at least through the next year,” Mr Whyte said.
KPMG, which has the fourth largest presence in WA, has lifted its staff numbers from 595 to 603 during the past 12 months.
Audit & Assurance partner, global head of mining, and chairman of partners WA, Trevor Hart, told Business News this formed part of a broader effort to bolster the firm’s WA operations and capitalise on new work presented via the energy transition.
“The themes that WA really sees itself right in the middle of are pretty exciting,” Mr Hart said.
“And it’s easy to be optimistic about the WA business environment, which is why I’ve been keen to build our capability at KPMG.”
He said three partners had been added to the firm’s deals team in WA in a bid to secure potential aggregation work or support organisations seeking to reshuffle portfolio assets.
“They tie-in nicely, particularly the critical minerals theme and the investment and attraction of capital into the critical minerals sector,” Mr Hart said.
After selling the attributes of WA to potential candidates on the east coast, the local office received 25 internal applicants for roles.
“I think that’s a symptom of the country understanding just how important WA is, where our economy and this community is going, and the sort of contribution they can make and lifestyle they can have in WA,” Mr Hart said.
“Events this year have led to significant focus on the big four and the profession as a whole, particularly highlighting the community’s expectations around trust and integrity,” Mr Hart said.
“KPMG takes its role in aligning with those expectations very seriously, recognising that transparency is central to helping the community understand us better.
“As a result, we expanded our 2023 Transparency Report, published annually, to openly discuss progress with our multi-year culture transformation program, our people, governance matters, and partner remuneration.
“This is our way of showing the community what we are doing at KPMG and being accountable.”
Moore Australia WA managing partner David Tomasi said many firms were resigned to the fact that staff shortages would continue, particularly given how border restrictions during COVID had curtailed people’s ability to move interstate for work.
“People can look at it from a very negative perspective and say they can’t find people, but reality is no-one out there can … you’ve just got to be fairly agile and open in your thinking about how you deliver your services,” Mr Tomasi told Business News.
Amid those and related challenges, he said work in the traditional tax and business advisory space had performed well in recent years, with increased compliance requirements seemingly putting pressure on smaller outfits.
“Accountants probably are becoming scarcer, particularly at that small to mid-cap market … and certainly with all the requirements we have as a sector or as an industry around some of our quality requirements here in Australia.
“That drives, to some level, a degree in consolidation, and we have seen some inorganic growth as well through the capture of automatic mergers/acquisitions over the course of the past couple of years.”
Moore acquired Applecross-based boutique tax and advisory firm Quay Australia in October this year, and Mr Tomasi said the group was on the lookout for firms of a similar fit.
HLB Mann Judd also indicated that acquisitions of smaller firms, or ‘bolt-on buys’, were on the cards.
Perth managing partner Lucio Di Giallonardo told Business News the group was well-placed to absorb a smaller business advisory and tax outfit.
“We’re not in the big four, obviously, but we’re well entrenched in the mid-tier, we’ve got infrastructure in place,” he said.
The firm, which looks after about 120 ASX-listed clients, is also seeking to firm up its offerings in the corporate advisory space in the next 12 months. The recruitment of a new partner to get the prospective division in place in time for the market to pick up is also planned.
“It’s in the area of valuations, independent accountants’ reports for IPOs, expert reports from mergers … we do that, but it’s not a focus for us,” Mr Di Giallonardo said.
“We want someone on the ground who’s able to set up, get the infrastructure in place waiting for that pickup [in the market].
“At the moment, we’re turning work away.”