Phil Green’s defence of his most respected and genuinely independent director, Michael Sharpe, predictably claims that he had no role in the appointment of PwC as auditor of various satellite funds.

Michael Sharpe is a former national audit partner of Coopers & Lybrand before the merger with Price Waterhouse and clearly retains close links to the firm because they provide him with an office and secretary in Sydney.

There wasn’t really anything else that Phil Green could say because Michael Sharpe would be severely compromised if it was revealed he had a hand in the decision by listed vehicles Babcock & Brown Wind Partners, Babcock & Brown Capital, Babcock & Brown Japan and Babcock & Brown Power to appoint PwC as its auditor.

 

Phil Green certainly takes the high ground in claiming “market best practice” in having a different auditor in the various managed fund vehicles to the bank itself.

But why would all these various Babcock satellite boards choose PwC when the accounting giant clearly doesn’t believe in such independence or market best practice?

How so? Have a look at Macquarie Bank, which was last year audited by Ian Hammond from PwC after long time auditor David Armstrong stepped aside under new HIH-inspired laws which require audit partner rotation every five years.

The various Macquarie satellites have the following auditors:

  • Macquarie Infrastructure Group Trusts: Mark Haberlin from PwC.
  • Macquarie Office Trust: Mark Haberlin from PwC
  • Macquarie Communications Infrastructure Group: Mark Haberlin from PwC
  • Macquarie Prologis Trust: Mark Haberlin from PwC
  • Macquarie Countrywide Trust: Mark Haberlin from PwC
  • Macquarie Airports Trust: David Armstrong from PwC
  • Macquarie Leisure Trust: Tim Allman from PwC
  • Macquarie Media: Mr E Barrow from PwC
  • Macquarie Capital Alliance: Mr E Barrow from PwC
  • Macquarie Private Capital Group: MJ Wilson from PwC

PwC clearly has a massive conflict of interest in auditing Macquarie Bank and all of its satellites. This is not a situation which should be tolerated by its main board audit committee, which is chaired by former Cochlear CEO Catherine Livingstone.

However, the uniformity of the decision by the ten Macquarie satellites to give all the audit work to PwC would suggest that this is a main board decision.

The Babcock main board has clearly made a contrary decision to not give any satellite work to its auditor, Ernst & Young. As chairman of the audit committee, Michael Sharpe presumably was involved in this principled decision.

Phil Green is simply asking us to believe that Sharpe withdrew at the point when the various satellite boards made the decision to go with PwC ahead of KPMG or Deloitte.

Whatever the case, Michael Sharpe should be clearing out his PwC office as we speak because this is not a good look.

Peter Fray

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