Two senior executives from Westpac came under a barrage of criticism from Senator Deborah O'Neill on Friday for failing to provide documents giving insight into the bank's non-compliance with rules requiring it to report transactions to Austrac.
The Labor senator put her disappointment with Westpac on the record when she said the company, which had been asked for a series of documents late in January, had failed to produce sufficient for her to be able to question the representatives of the bank.
The company sent the committee a letter on the evening before the parliamentary committee arguing that they were unable to provide certain information to the committee because of ongoing regulatory investigations.
Westpac appeared at a parliamentary committee hearing that is a part of the Parliamentary Joint Committee of Corporations and Financial Services inquiry into audit regulation in Australia, which was initiated by Senator O'Neill.
The inquiry holding of the inquiry has been sparked by concerns auditors are underperforming in their role as agents of shareholders to ensure companies comply with reporting requirements and other relevant laws.
The committee is also considering whether to introduce audit regulations of the kind seen in overseas jurisdictions, particularly ones which limit the non-audit services firms can provide to clients if they also undertake the external audit of financial statements.
Westpac's acting chief financial officer Gary Thursby and chief risk officer David Stephen represented the bank. Thursby said the bank was sorry for its failure to comply with Austrac rules requiring it to report transactions - it failed to report 23 million. He said they would answer questions related to the Austrac issues.
But there was a qualifier.
"To the extent the matter is relevant to the terms of reference of this inquiry, we will seek to answer your questions. However, legal proceedings are under way along with related regulatory investigations," Thursby said. "I hope you understand that we will be limited on what we can say on some matters."
Stephen told the committee that Westpac had set up processes to deal with the issues arising from the Austrac non-compliance while Thursby noted that Westpac's auditor had no role in detecting issues related to the risk management framework.
PricewaterhouseCoopers is Westpac's audit firm, Thursby said, and the audit firm's work related to the controls and systems that are in place that directly impact on the preparation of financial statements.
The bank's auditors were advised of issues related to non-compliance related to Austrac rules in 2018. Austrac commenced legal action against the bank late last year for the 23 million breaches of notification requirements.
Clarification about how the bank was progressing on Austrac-related issues was followed by O'Neill's expression of "profound disappointment at Westpac's failure to provide documentation on request".
The Labor senator placed on record that she requested documents on 28 January 2020, but the committee did not receive a formal reply in writing from Westpac until 6.30 in the evening before the day of hearings.
O'Neill told the hearing that she received a limited amount of documentation related to Westpac's appearance just after eight o'clock on the morning of the hearing and it did not give her sufficient time to examine the documentation.
She also told the Westpac representatives that the parliamentary committee has a wide-reaching power to demand information and that the bank may have been poorly advised on what documents it was able to keep from the committee's eyes.
O'Neill noted that she did not receive responses or documents that related to key issues relevant to the inquiry such as the interaction between the provision of non-audit services by firms that are also engaged to do the external audit of a bank's financial statements.
"The work of this committee with regard to this matter needs to continue and I am very concerned that there may be efforts to shut down our inquiry," Senator O'Neill said. "This matter alone demands that we have further time to investigate."
The stand-off between the Big Four bank and the senator followed a fortnight during which the committee had received a series of disclosures from the corporate regulator, accounting firms and other parties arising from information requests made by the committee in December last year.
An upload of one of those documents containing previously unreleased audit firm inspection results from the corporate regulator's inspection program was spotted by The Australian's Michael Roddan. The committee hearing began with chairman James Patterson addressing the story related to the evidence ASIC used to substantiate its observation that audit quality had deteriorated over the better part of a decade.
Chairman James Patterson apologised for the publication of the unredacted data, which ASIC has publicly acknowledged cannot be used as a general guide to the overall quality of auditing by accounting firms given the inspections of working papers cover a limited number of samples.
The corporate regulator has also firmed up its public messaging on wanting to throw the book at recalcitrant auditors as a part of its new policy that looks more closely at taking auditors and firms to court if sufficient evidence can be obtained to secure a conviction of an offence.