In an exclusive, Reuters is reporting this morning that PwC China might cut as much as half of its 2,000-person financial services audit group. “The move follows Chinese regulators’ scrutiny of PwC this year for its role as the auditor of troubled property giant China Evergrande Group which, in turn, triggered the exit of some clients,” wrote Julie Zhu. And it gets worse.
The firm, with 781 partners and nearly 19,000 employees in mainland China as of last September, according to its website, is also mulling laying off about 20% of the staff in other auditing teams and non-auditing business lines, they added.
PwC China’s layoffs started last week, and the overall target is expected to be met over a period of time, said the sources, who declined to be identified as they were not authorised to speak to media.“In light of changes to the external environment, we are making some adjustments to better optimise our organisational structure to align with market demand,” a PwC spokesperson said in an emailed statement.
Bloomberg reported last week that PwC China began “mass layoffs” due to losing dozens of clients as a direct result of the Evergrande debacle (timeline of that situation here, we don’t need to get into it here). The number they threw out was 100 people from different teams working in Beijing, Shanghai, and others; one person told Bloomberg more than half of one team was laid off.
At that time, a spokesperson gave Bloomberg the same “changes to the external environment blah blah” spiel and added: “These adjustments are a difficult decision. We are actively communicating with our people and will ensure that the plan is in compliance with all relevant labor laws in China.”
It was reported in March that Chinese authorities — a group of people you really don’t want to get on the bad side of — were looking into PwC and questioning some of the people who worked on the Evergrande engagement. “There are serious questions about PwC’s role in the Evergrande fraud, specifically what it knew about the improper revenue recognition,” said Nigel Stevenson, analyst at Hong Kong accounting research firm GMT Research Ltd., to Bloomberg. At that same time, Evergrande founder Hui Ka Yan was fined 47 million yuan ($6.5 million USD) and totally banned from China’s capital markets for the remainder of his miserable days on Earth.
According to a Reuters source, earlier this month the firm asked the 1,000 people working in financial services audit in Shanghai to take 15-day leave in July and August during which time they’d be paid 1/5th of their usual salary.
Exclusive: PwC weighs halving of China financial services audit staff, say sources [Reuters]
Update: Financial Times has followed up with a story published on July 16: PwC loses two-thirds of accounting revenues from clients listed in mainland China
