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).
According to Reuters, Bank of China – a major state-owned enterprise and one of PwC’s largest clients in mainland China – disclosed in a recent filing that it plans to transition its auditing services to EY, subject to shareholder approval.
This move comes after Bank of China had earlier indicated its intention to retain PwC as its auditor for 2024.
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.
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.
In June, sources familiar with the matter claimed that Chinese authorities were preparing to levy a record fine of up to 1 billion yuan (HK$1.08 billion) against PwC.
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.
PwC previously denied the allegations. The firm responded to an anonymous letter circulating on social media that accused it of misconduct during its audits of Evergrande. It characterised the allegations as “inaccurate” and harmful to its reputation, and it reported the matter to relevant authorities. The authenticity of the letter has not been verified.
