PwC Struggling in China With Exodus of Clients and Staff

Summary

PwC faces scrutiny after over 30 mainland Chinese clients severed ties since March, following an investigation into accounting fraud by China Evergrande, where PwC was the auditor. The fallout has seen other 'Big Four' auditors and local firms gain clients, with PwC's market share shrinking. Despite retaining marquee clients like Tencent and Alibaba, PwC's future hangs in balance as US Airway clients have left, and if the trend continues, it could pose significant challenges.

Takeaways

• 📉 PwC has experienced a loss of over 30 mainland Chinese clients since March due to regulatory scrutiny.
• 🏢 The investigation stems from accounting and fraud issues at China Evergrande, where PwC was the auditor.
• 🔍 Chinese regulators are looking into PwC's role in the overstatement of revenue and profits at Evergrande.
• 💔 Bloomberg News reported that PwC may face a record fine and operational restrictions in China.
• 🤝 Other 'Big Four' auditors are gaining clients as a result of PwC's situation.
• 📈 Local auditing firms are also benefiting, with an increase in market share.
• 💼 There is a trend of PwC employees applying to other auditing firms, indicating a potential shift in the industry.
• 🔑 Major clients like Tencent and Alibaba are currently sticking with PwC, but there are concerns about the future.
• 🛫 Some US Airway clients have already switched from PwC, signaling a potential ongoing trend.
• 🚫 If PwC cannot reverse this trend, it could lead to further problems in the future.

Q & A

How many mainland Chinese clients has PwC reportedly lost since March?

PwC has reportedly lost more than 30 mainland Chinese clients since March.

What triggered the loss of clients for PwC?

The loss of clients started when Chinese regulators began investigating the accounting and fraud of China Evergrande, for which PwC was the auditor.

What is PwC's role in the China Evergrande scandal?

PwC's role is being investigated in relation to the overstating of revenue and profits by China Evergrande.

What actions are regulators considering against PwC?

Regulators are reportedly weighing a record fine on PwC and considering operational spending and uncertain operations in the country.

Which companies are benefiting from PwC's loss of clients?

The other three big four auditors are winning clients, and local auditing firms have also picked up clients.

How is the market share of auditing firms changing due to PwC's situation?

The revenue market share of auditing firms, including the other big four and local firms, is growing as a result of PwC's loss of clients.

What opportunities are other auditing firms using to their advantage?

Other auditing firms are using this opportunity to poach staff from PwC, with dozens of applications received from PwC employees.

Are there any indications of how many staff members are leaving PwC?

There is no exact number known yet, but the idea is being gathered from recruiters and other firms.

Which marquee clients of PwC are mentioned in the script?

Tencent and Alibaba are mentioned as marquee clients that are sticking with PwC for now.

What could be the potential problem for PwC if it cannot retain its clients?

If PwC cannot stop the trend of clients dropping out, it could face a problem down the road.

Are there any US Airway clients that have dropped PwC as their auditor?

Yes, some US Airway clients have dropped PwC, and this trend could be problematic if it continues.