A royal commission is needed to investigate scandals around the big accounting firms and determine how the federal government can wean itself off an over-reliance on external contractors, a leading integrity advocate says.

The political fallout from revelations that accounting giants have misused secret public data widened on Monday as a Senate probe struggled to get answers from Deloitte, echoing an earlier scandal that saw PwC hold back about its misdeeds.

Deloitte chair Tom Imbesi declined to provide details about a key partnership agreement – citing commercial-in-confidence – and turned down calls to name the department at the centre of a scandal that saw Deloitte breach confidentiality.

Geoff Watson, a director at the Centre for Public Integrity, said big accounting firms like PwC are trying to obstruct public investigations into their wrongdoing, raising the need for a royal commission to probe the extent of scandals across the industry.

“These are all stock standard tactics of obstruction,” Mr Watson told The New Daily.

“I don’t understand how companies which make hundreds of millions of dollars a year from government contracts can deny to the Australian taxpayer access.”

The big four consultancies make about $1.4 billion a year from public contracts, according to Centre for Public Integrity data, a figure that has increased by 400 per cent over the past decade – coinciding with a huge rise in political donations.

Deloitte alone booked $212 million in taxpayer business over the past 12 months, which is about 25 per cent of its revenue, the Senate probe heard on Monday.

Mr Watson said inadequate co-operation with a Senate inquiry should normally lead to firms being barred from tendering for such lucrative public contracts.

But the big accounting firms – Deloitte, PwC, EY and KPMG – are ultimately too entrenched after decades of building reliance on external contracts, he said.

“It seems like our government is incapable of functioning without them,” Mr Watson said.

‘Failed self-regulation’

Mr Watson is not the only one calling for a royal commission as the scale of alleged wrongdoing by leading accounting and consultancy firms becomes clear months after revelations PwC used secret tax information to enrich its clients.

Former KPMG partner turned whistleblower Brendan Lyon called for such a probe in an appearance before the Senate inquiry on Monday afternoon, saying a powerful investigation is needed to restore public trust in the accounting sector.

Mr Lyon left KPMG in 2021, claiming he resisted “improper pressure” to change his work in a way that would have mis-stated NSW state accounts by $10 billion.

“It’s clear on the evidence that these firms have been able to operate beyond the law, beyond sanction and beyond regulation,” Mr Lyon told senators on Monday.

“The integrity of public and corporate reporting is too important to leave to failed self-regulation.”

The calls for a royal commission came after former Australian Competition and Consumer Commission (ACCC) chair Alan Fels told the Senate inquiry on Monday that the four firms should be broken up to separate their audit work from consulting.

Dr Fels said that audit work is “critical to the economy” and shouldn’t be “compromised unnecessarily”.

“Non-audit activities have the potential to compromise the conduct of audit,” he said.

“Self-regulation can’t be relied upon, nor can government regulation.

“We therefore need legislation to break up the big four and, in turn, other audit businesses and to prohibit audit businesses from doing consulting advisory and other forms of business.”

Mr Watson said a royal commission, which would have broad powers to probe wrongdoing as well as investigate the changes necessary to help governments wean themselves off reliance on external contracts, could examine ring fencing.

“Have a look at the successful royal commission into the aged-care sector and the current commission into the disability services sector,” Mr Watson said.

“If you look at those, they’re presided over by maybe a judge, but the principal royal commissioners are people with other skills … it would be best if they were people who knew how the public service works at its best.”