PwC has agreed to an order to "stand down" any staff who knew about Treasury tax leaks from working on any existing or future government contracts.
On Wednesday night, the Australian Federal Police (AFP) launched an investigation into the firm's former head of international tax, Peter-John Collins.
Mr Collins shared confidential information about changes to tax laws with partners, staff and clients that would be impacted by them.
Finance Department secretary Jenny Wilkinson has told a Senate committee the direction to other staff who knew about the leaks stands until an internal review of the saga has been completed.
"I consider PwC's abuse of confidence and trust with the Treasury and PwC's subsequent handling of this breach to be a very serious issue," Ms Wilkinson said.
Ms Wilkinson said had the confidentiality breach occurred as part of a contract with PwC, it would have given Finance the ability to consider cancelling all existing contracts with the firm.
She said that because the breach had come from information obtained by Mr Collins through stakeholder consultations and not a contract, the option to cancel all contracts and suspend them from future procurements was not available to the department.
Finance learned in January that an individual had leaked confidential information, but was not advised by PwC that the breach was broader than what was being publicly reported.
Ms Wilkinson said Finance became aware on May 2 that the confidentiality breach was "significantly broader" than one single individual, and that the firm's initial response had failed to address the issues being raised.
She said the department wrote to PwC last week advising it to remove personnel directly involved in or with knowledge of the leak from all existing and future contracts.
The group agreed to this.
The department also wrote to all of its advisory services suppliers on Wednesday seeking agreement to add a clause that would allow contracts to be terminated in the case of an "adverse event", including an event outside the contract, that was deemed to have been poorly handled by the supplier.
"I consider that these actions are an appropriate and considered response to the matter based on the information that is currently available," Ms Wilkinson said.
"These actions deliver a clear message to suppliers that unethical behaviour will not be tolerated."
Police grilled on possible PwC conflict
Facing questioning at Senate estimates, the AFP also committed to examine whether it was appropriate for PwC to be conducting an internal audit for police while the firm was simultaneously being investigated over the leak.
The AFP said it was reviewing its arrangements, and Commissioner Reece Kershaw said he would also "be sitting down and having a deeper discussion" over whether there was a conflict of interest in relation to communications with former NSW Police chief Mick Fuller, who last year joined PwC as a partner.
Commissioner Kershaw said he had received one text message from Mr Fuller, who expressed his personal disappointment over the leak.
Greens senator David Shoebridge suggested that the commissioner should not keep contact with Mr Fuller.
Home Affairs Minister Clare O'Neil said this morning PwC's actions were a "grotesque betrayal of trust", and that a further response was still in the works.
"We are looking at a whole-of-government response to this which the Minister for Finance in particular is involved in," Ms O'Neil said.
"We will not stop until we get to the bottom of exactly what has happened here.
"It is a disgraceful incident and it must be properly investigated."
As of the middle of May this year the federal government had committed to $255 million worth of contracts with PwC.
A spokesman for PwC said the firm had launched an independent review earlier this month into the matter.
"We deeply regret that we have failed the high standards we set for ourselves as an organisation," the spokesman said.
"We now need to re-earn trust, which is why we have taken appropriate action, including announcing an independent review of the firm's governance, accountability and culture.
"We will not hesitate to take further actions."
