PwC loses major client Bank of China amid regulatory probe
Aug 20, 2024
Synopsis
PwC has lost its biggest mainland China client, Bank of China, to EY. This change follows a regulatory probe into PwC's work with China Evergrande. Over 50 Chinese firms have dropped PwC recently, and EY along with KPMG have acquired many of these clients.
Auditor PwC has lost its largest mainland China-listed client, Bank of China , to rival EY, adding to an exodus of clientele amid a regulatory investigation into its work on troubled property developer China Evergrande Group.
State-owned Bank of China had as recently as March stated plans to reappoint PwC as its auditor for 2024 but in a filing late on Monday said it plans to appoint EY. The decision will be submitted for shareholder approval, it said.
PwC, once the leading auditing firm in China, declined to comment.
Bank of China paid PwC 193 million yuan ($27 million) in auditing fees last year, filings show. That's more than the combined auditing fees from its three next biggest domestically listed clients for 2023: China Life Insurance, China Telecom and insurance giant PICC. The trio have also dropped PwC as a client, according to filings.
At least 50 Chinese firms, many of which are state-owned enterprises or financial institutions, have either dropped PwC as their auditor or cancelled plans to hire the firm in recent months, a Reuters examination of filings shows.
As of March, PwC was the auditor for about 110 companies listed in mainland China, according to the company's website.
Chinese authorities have been looking at PwC's audits of Evergrande which has been accused by the securities regulator of a $78 billion fraud - an investigation that is expected to result in heavy fines. PwC audited Evergrande for almost 14 years until early 2023.
Since at least April, regulators have asked several large state-owned clients of PwC to drop the auditor, sources have said.
They have also advised that state-owned firms and listed companies should be "extremely cautious" about hiring auditors that have received regulatory fines or other penalties in the past three years.
About half of the corporate clients that have dropped PwC have been snapped up by EY and KPMG, the Reuters examination of filings shows.
PwC has been BOC's auditor since 2021. Prior to that, EY audited BOC for eight years. Chinese rules stipulate that state-owned firms should not employ the same auditor for more than eight consecutive years.
[The Economic Times]
