PwC Loses Major Client Bank of China to EY

Auditor PwC has lost its largest mainland China-listed client, Bank of China (BOC), to rival EY, marking a significant shift amid ongoing regulatory investigations into PwC’s work on troubled property developer China Evergrande Group.

Bank of China Switches to EY:

State-owned Bank of China had previously planned to reappoint PwC as its auditor for 2024. However, in a filing late on Monday, BOC announced its intention to appoint EY as its new auditor, pending shareholder approval. PwC, once a leading auditing firm in China, declined to comment on the matter.

Financial Impact on PwC:

Bank of China paid PwC 193 million yuan ($27 million) in auditing fees last year, making it PwC’s most lucrative mainland China-listed client.

This fee exceeds the combined auditing fees from PwC’s next three largest domestically listed clients for 2023: China Life Insurance, China Telecom, and PICC (People’s Insurance Company of China). Notably, according to recent filings, these clients have also dropped PwC as their auditor.

Widespread Client Exodus:

PwC’s loss of BOC is part of a broader trend, with at least 50 Chinese firms—many state-owned enterprises or financial institutions—having either dropped PwC as their auditor or canceled plans to hire the firm in recent months, according to a Reuters examination of filings.

According to its website, as of March, PwC was the auditor for about 110 companies listed in mainland China. However, Chinese authorities have been scrutinizing PwC’s audits of Evergrande, accused of a $78 billion fraud.

This investigation is expected to result in heavy fines, prompting regulators to advise state-owned firms and listed companies to be “extremely cautious” about hiring auditors who have faced regulatory penalties in the past three years.

Shift to Other Audit Firms:

Reuters examination of filings shows that in response to PwC’s regulatory troubles, about half of the corporate clients that have dropped PwC have been acquired by rivals EY and KPMG.

Following EY’s eight-year tenure, PwC has been BOC’s auditor since 2021. Chinese regulations stipulate that state-owned firms should not employ the same auditor for over eight consecutive years.