Written by Julie Zhu
HONG KONG (Reuters) – Chinese regulators in recent months have asked several government clients of PricewaterhouseCoopers (PwC) to step down from the auditor as they brace for sanctions over their work for property developers. and problems at Evergrande, said two sources.
Regulators, particularly the Ministry of Finance (MOF), have been issuing so-called “window guidance”, or verbal instructions to major government financial institutions since at least April, sources said on condition of anonymity. and information. it was a secret.
Bank of China (BOC), China Life Insurance, PICC, China Taiping Insurance and China Cinda Asset Management, are now among the top 30 listed Chinese companies that have engaged PwC as auditors this year , according to Reuters figures based on business reports. .
PwC declined to comment. MOF did not respond to a faxed request for comment. BOC, China Life, PICC, China Taiping and China Cinda did not immediately respond to a request for comment.
MOF is the largest shareholder of 20 major government financial institutions including five major banks, four insurers and four bad debt managers, with shares of t either directly or through other government agencies such as Central Huijin. The Ministry is also the primary regulator of auditors in China.
It was not immediately clear whether all state-owned firms received “window guidance” from the ministry or other government agencies.
Sources said the guidance was one of the main reasons clients left PwC, putting more pressure on the firm which has responded by cutting staff numbers and cutting the salaries of some senior partners.
BOC, China Life and PICC were among PwC’s biggest clients in terms of accounting fees, which last year paid about 200 million yuan ($28 million), 64 million yuan and 41 million yuan, respectively.
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Other state-owned companies including major power producer PetroChina and major railway and highway builder China Railway Group have also recently left PwC.
China Telecom, another big customer, last week said it wanted to appoint KPMG as its external auditor for 2024, replacing PwC in the middle of the financial year.
Non-national customers are also affected. Shenzhen-listed Mindray Bio-Medical Electronics and Shanghai-listed Eastroc Beverage in May both canceled plans to hire the firm as their auditor, according to their reports.
Last year, the MOF and other authorities said that state-owned firms and listed companies should be “extremely careful” about hiring auditors who have received regulatory sanctions or other penalties in the past three years.
PwC has come under considerable pressure recently over its work for China’s Evergrande Group, which was ordered wound up in January after defaulting on debts.
Chinese authorities are investigating PwC’s role in auditing Evergrande after the securities regulator charged the troubled property developer in March with a $78-billion fraud.
PwC was Evergrande’s auditor for about 14 years until it resigned in early 2023.
As an auditor of about 110 companies listed in the country since March of this year, on its website, PwC has built a large presence in China over the past two decades, with business interests ranging from auditing financial, advisory to tax services.
It was also the market leader among all accounting firms in the country, with the main arm of PwC Zhong Tian LLP recording revenue of 7.92 billion yuan in 2022 , making him China’s top auditor that year, according to official figures.
($1 = 7.1600 Chinese yuan renminbi)
(Reporting by Julie Zhu; Additional reporting by Xie Yu; Editing by Miral Fahmy)
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