Global accounting firm PwC, one of the world’s top four accounting firms, has been facing setbacks in China due to its involvement in the Evergrande false accounting scandal. According to the latest reports, PwC is under pressure in terms of business and revenue due to the loss of a significant number of clients, leading to layoffs in its Chinese business department.
Bloomberg cited sources who chose to remain anonymous, stating that at least 100 employees from various teams in PwC’s Beijing, Shanghai, and other offices in China will be laid off. The sources mentioned that more than half of the employees in one team are facing termination. The final number of employees to be laid off across the company is not yet clear.
A spokesperson for PwC responded to Bloomberg’s inquiry by stating: “Given the changes in the external environment, we are making some adjustments to better optimize our organizational structure to meet market demands… This is a difficult decision. We are actively communicating with employees and ensuring that the plan complies with all relevant labor laws in China.”
PwC did not disclose detailed information about the layoff plan.
In March this year, China’s real estate giant Evergrande received an administrative penalty notice and a fine of 4.175 billion yuan for financial fraud. The penalty notice revealed that Evergrande inflated its revenue in the annual reports for 2019 and 2020 by a total of 564.1 billion yuan. PwC had issued unqualified audit opinions for Evergrande’s annual reports from 2009 to 2020.
Chinese regulatory authorities have been scrutinizing PwC’s role in providing accounting services to Evergrande. In May this year, Bloomberg reported, citing sources, that Chinese authorities are considering imposing a fine of at least 1 billion yuan (138 million US dollars) on PwC and may suspend some of its business operations in China.
Affected by this turmoil, at least 36 Chinese clients have canceled their cooperation with PwC within three months since March this year, resulting in audit fee losses of up to 665 million yuan.
PwC is the highest-earning accounting firm in mainland China. According to data from the Chinese Institute of Certified Public Accountants, PwC had a revenue of 7.925 billion yuan in 2022, with audit revenue accounting for 6.837 billion yuan. In that year, PwC audited approximately 400 Chinese companies listed in Shanghai, Shenzhen, Hong Kong, or New York. Revenue dropped to 7.137 billion yuan in 2023.
As of December 31, 2023, PwC Zhongtian (PwC’s entity in China) had 291 partners and over 1,710 registered accountants.
Last Wednesday, on July 3, PwC announced that Daniel Li will succeed Raymund Chao, who retired at the end of June, as the Chairman of PwC Asia Pacific and China. Li, aged 53, graduated from Shanghai University of Finance and Economics in 1993 and joined PwC, becoming a partner in 2004. He is the first mainland Chinese to hold this position.