30 May Big Four rivals circle as clients ditch PwC China amid threat of Evergrande audit penalties
PwC China has been shunned by more high-profile clinet sin the country as the Big Four accoutant braces for penalities related to its audit of distressed property developer Evergrande.
China Merchants Bank, a top retail lender 는 2024년도 onshore & offshore audit에 대하여 EY에서 딜로이트로 회계 법인을 바꾸려고 함. 딜로이트를 다시 신임한 것은 PWC China를 고용하기로 지난 9월에 결정한 것을 번복한 것임.
마찬가지로 이번주에 China Railway Group, a government-owned construction conglomerate도 2024 auditor and internal contrl auditor를 PwC에서 딜로이트로 변경함.
The two are the latest to ditch PwC in recent months, as companies take into consideration its uncertain future in China, with a leadership change and potential penalities being imposed by the authorities .Regulators also reiterated last year that state-owned enterprises and listed companies should not typically hire auditors that had suffered significant fines or other punishment within three years.
China’s securities regulator in March accused Evergrande of inflating its mainland revenues by almost $80bn in the two years before the developer defaulted on its debts in 2021. This was despite the PwC giving the accouts a clear bill of health, leading to fears that it could face one of the largest fines ever imposed ona Big Four accounting firm in China, as well as other sanctions.
Earlier in May, the state-owned insurance group PICC said it had axed PwC as auditor just after three years, hiring EY instead. In the same week ,the Shanghai-listed Eastroc Beverage cancelled a shareholder vote that would have reappointe dthe firm as it auditor, saying it needed to “further veritfy related matters surrouding the accounting firm”
Chinese state-owned enterprises들은 현행 법 하에서 8년에 한 번씩 감사 기관을 변경해야 함. listed companies는 10년에 한 번씩. 최근 몇 주 사이, Hong Kong-listed China Taiping Insurance, China Electronics Hued Technology, Qindao Port International and Shanghai-listed National Silicon Industry Group and Tsingtao Brewery changed auditors from PwC as they reached these limits, according to exchange filings. PwC China had not reached the maximum eight or 10 years for PICC, China Railway or Eastroc.
However, PwC China has been reappointed or won fresh businesses in some instances. China Merchants China Direct Investments chose the firm as auditor after its annual meeting last week, while HK-listed tech companies Meituan and Kanzhun both reappointed PwC at recent board meetings. Listed companies still have months to decide on auditors for 2024 accounts.
In recent weeks, China rivals, including other Big Four firms, have been looking at bids to win PwC client. PwC has a “very can-do attitude” in China, more than other members of the Big Four. It also had a size advantage after its merger with Arthur Andersen in 2022.
PwC counts dozens of larger Chinese companies among its clients, including another signficiant property developer Country Garden, which became distressed after China’s real estate liquidity crunch began in 2021.
PwC China now had a “heightened association risk” following its Evergrande audit. “Losing clients couuld trigger a domino effect”
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