Bank of China cuts ties with PwC amid scandal fallout
Bank of China cuts ties with PwC amid scandal fallout | Insurance Business Asia
Insurance News
Bank of China cuts ties with PwC amid scandal fallout
ompany under regulatory scrutiny over its role in client’s scandal
Insurance News
By
Roxanne Libatique
PwC has lost Bank of China as a client, marking a significant shift in its business amidst ongoing regulatory scrutiny tied to the firm’s audit work for China Evergrande Group (Evergrande).
This move comes after Bank of China had earlier indicated its intention to retain PwC as its auditor for 2024.
Exodus of PwC clients
In 2023, Bank of China paid PwC 193 million yuan ($27 million) in auditing fees, a figure exceeding the combined payments from PwC’s next three largest domestic clients – China Life Insurance, China Telecom, and PICC. These companies have also recently terminated their auditing agreements with PwC, according to corporate filings.
PwC has seen an exodus of at least 50 clients, including numerous state-owned enterprises and financial institutions, as Chinese authorities intensify their review of the firm’s practices. As of March, it was responsible for auditing approximately 110 companies listed on China’s stock exchanges.
PwC under regulatory probe
The heightened regulatory focus on PwC is linked to its long-standing role as the auditor for Evergrande, a company accused by Chinese regulators of a $78 billion financial misstatement.
PwC served as Evergrande’s auditor for nearly 14 years before ceasing its engagement in early 2023.
Reports suggest that since April, regulatory bodies have advised state-owned enterprises to avoid engaging auditors who have faced penalties within the last three years. Many of PwC’s former clients have since engaged other auditing firms, particularly EY and KPMG.
The anticipated penalty, which is linked to the firm’s auditing work with Evergrande, would surpass the previous highest fine of 212 million yuan imposed on Deloitte Touche Tohmatsu in 2023.
In addition to the monetary penalty, PwC could also face temporary suspensions of operations at several of its offices across mainland China.
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