The credibility of the Big 4 accounting firms— Deloitte, PwC, EY, and KPMG —has been severely undermined by a series of global scandals that have prompted serious regulatory actions. There have been big scandals globally for the last 25 years, with a 2023 scandal in Australia involving PwC resulting in its government consulting being sold to a third-party for ‘one dollar”. Soon after, in late 2023, PwC's former organisation in Sri Lanka and the Maldives transitioned to Deloitte, although both organisations were careful not to refer to the Australian scandal. There was parliamentary inquiry in Australia into the Big 4 audit firms, and PwC specifically, but no tangible reforms happened.
Then in mid-2026 all this changed. It marks a pivotal moment for an industry long perceived as a bastion of financial probity but since embroiled in controversies that demand rigorous reform and accountability. There is a global push for more regulation, and Sri Lanka may not be immune to the implications.
Here are some of the many global scandals involving the Big 4.
KPMG Australia: Whistleblower Revelations and Consequences
KPMG finds itself at the epicentre of a storm in Australia, where allegations surfaced about the misuse of confidential client documents. An internal whistleblower accused senior partners of exploiting board papers from construction giant Lendlease to secure audit contracts with other firms, including the Westpac Bank . To make matters worse, KPMG first claimed that they had engaged an external law firm Ashurst which did not substantiate these claims. However, Ashurst later revealed to an Australian Parliamentary inquiry that they were never instructed to investigate the whistleblower’s claims. A subsequent investigation by another external firm, Allens, corroborated some of the accusations, leading to the formal Parliamentary inquiry.
The fallout was significant. KPMG's CEO and audit partner resigned, while the COO was demoted. Many of their Board of Directors resigned. The firm agreed not to bid for new Australian government work until September 2026, pending an independent review of its governance and ethical frameworks. This scandal has led to a broader government re-evaluation of its reliance on the Big 4, with federal spending on their contracts seeing substantial cuts.
EY Australia: Data Breach Sparks Outrage
In a separate scandal, EY Australia faced a severe breach of trust when two former employees accessed private banking details of Prime Minister Anthony Albanese and a senior EY partner while on secondment at the Commonwealth Bank of Australia. This breach of privacy resulted in criminal charges against the individuals involved and ignited national outrage over the access third-party contractors have to sensitive data. The incident has accelerated calls for stricter regulatory measures on multinational consultancies operating in Australia.
Exam Cheating and Ethical Violations in the Netherlands
The credibility of the Big 4 has also been tarnished by widespread exam cheating scandals in the Netherlands. Deloitte, PwC, and EY were fined a collective $8.5 million by the Public Company Accounting Oversight Board (PCAOB) for rampant cheating on internal exams, including ethics tests, between 2018 and 2022. The scandal resulted in significant financial penalties, leadership changes and increased regulatory scrutiny. The Dutch Authority for the Financial Markets (AFM) placed these firms under "intensive supervision," mandating root-cause investigations and cultural remediation efforts.
PwC China/Hong Kong: Evergrande Audit Failures
PwC faced severe repercussions following the collapse of China Evergrande Group, where it was revealed that the firm had failed to perform basic audit procedures, leading to substantial revenue misstatements. The scandal concluded with Hong Kong regulators imposing fines totalling HK$1.3 billion and a six-month ban on onboarding new clients. This enforcement action followed similar penalties levied by mainland Chinese authorities. The debacle resulted in widespread client cancellations and significant layoffs across PwC’s China and Hong Kong operations. Furthermore, Evergrande’s liquidators are pursuing legal claims against PwC, seeking damages amounting to US$8.4 billion.
Global Market Shifts and Regulatory Proposals
The cumulative impact of these scandals has triggered a global shift in the accounting industry. The Big 4 are now offloading high-risk clients to mitigate future risks, with mid-tier firms like BDO and Grant Thornton gaining market share. In Australia, its Treasury has released far-reaching proposals targeting the structural overhaul of the Big 4, including potentially forcing separation of audit and consulting functions, capping partner numbers, and mandating firm tenure limits to prevent conflicts of interest.
Enforcement Dynamics: Statutory vs. Professional Regulation
A critical aspect of the enforcement landscape involves the dual regulatory approach: statutory regulators like Australian Securities and Investments Commission (ASIC ) and the US based Public Company Accounting Oversight Board (PCAOB), which focus on systemic and market integrity. These statutory regulators wield significant authority, capable of imposing multi-million-dollar fines and operational sanctions on organisations .
In contrast, professional institutes such as Chartered Accountants of in Australia (CA ANZ ), England & Wales (ICAEW), and even Sri Lanka (ICASL) focus on individual conduct and ethics, and primarily discipline individual members through fines and suspension of credentials
All these chartered bodies are members of the International Federation of Accountants (IFAC), which is merely an advocacy (lobby) group for the financial accounting profession and not an accreditation or standards body. Despite IFAC’s posturing that it has some sort of disciplinary enforcement over its member bodies, it has none.
Public Implications and Taxpayer Costs
The ramifications of the Big 4 scandals extend beyond corporate boardrooms, impacting public finances and taxpayer interests. In Australia alone, the Big 4 have secured billions in taxpayer-funded contracts over the past decade, yet scandals have highlighted inefficiencies and conflicts of interest in public sector spending. Additionally, corporate tax avoidance schemes, such as those revealed in the PwC tax scandal, undermine federal tax collection efforts, costing governments billions in lost revenue.
A Call for Accountability and Reform
The recent string of scandals globally underscores an urgent need for systemic reform and heightened accountability within the Big 4 accounting firms. The series of global incidents—from data breaches and exam cheating to audit failures—reveals deep-seated issues that necessitate comprehensive regulatory and structural changes.
The path forward demands that these firms reassess their internal cultures and governance frameworks. Implementing rigorous internal controls and fostering a culture of transparency and ethical behaviour are vital. The emphasis should be on rebuilding trust with clients, regulators, and the public. The proposed structural reforms, such as separating audit from consulting services, could mitigate conflicts of interest and enhance audit integrity.
Furthermore, regulatory bodies worldwide must strengthen oversight mechanisms to ensure compliance and ethical conduct. This includes enhancing the enforcement powers of statutory regulators and ensuring that professional institutes have the authority to impose meaningful penalties on individual accountants who breach ethical standards.
The Role of Government and Stakeholders
Governments play a crucial role in driving these changes. By adopting and enforcing stringent regulations, they can ensure that the Big 4 are held accountable for their actions. The proposals set forth by the Australian Treasury, which include capping partner numbers and mandating firm tenure limits, serve as a blueprint for other countries grappling with similar issues.
Additionally, stakeholders, including investors, clients, and the public, must demand greater accountability and transparency from these firms. By doing so, they can exert pressure on the Big 4 to prioritize ethical practices and enhance the quality of their services.
Rebuilding public trust is perhaps the most significant challenge facing the Big 4. They must demonstrate a commitment to ethical standards and accountability, which can be achieved by openly addressing past failures and implementing reforms that prevent future misconduct. Transparent communication with stakeholders about the steps being taken to rectify issues is essential in this process.
Engagement with professional bodies and participation in industry-wide initiatives to promote ethical practices can further bolster their credibility. By leading the charge in reforming industry standards, the Big 4 can begin to repair their reputations and restore confidence in their services.
NOTE: The references collaborating all these scandals are provided in a longer article titled “ Big 4 Credibility - Gone with the Wind” published in the On Target magazine of CMA (ANZ).
Professor Janek Ratnatunga, MBA, PhD (Bradford, UK) is a former Associate Dean of Business & Economics at Monash University and is currently CEO of the Institute of Certified Management Accountants of Australia & New Zealand (CMA ANZ). He is a fellow member of the Institute of Chartered Accountants of Sri Lanka and an alumnus of KPMG (Sri Lanka).
The culture of bending backwards to big corporates used to be prevailent here. Don't know how it is now. I had come across one particular case where an IPO was based on a questionable valuation of the prospective company and when asked about it from one of the B4 who were the auditors I was given a slip of paper with two lines - total value and value per share - nothing more. This particular company went down eventually obviously. I think the smaller audit firms must be doing a better job simply because there will be better direct supervision.
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