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On July 17, it was reported that foreign media quoted people familiar with the matter as saying that global accounting giant PricewaterhouseCoopers is considering cutting up to half of its financial services audit staff in China.

When a reporter from Nanduwan Finance interviewed PwC on this issue, relevant personnel responded that due to changes in external objective conditions, the organizational structure was optimized accordingly according to market demand, and emphasized that "this adjustment was a difficult decision."

This is not the first time that PwC has been involved in layoff rumors. Previously, there were repeated reports that PwC's Guangzhou branch would close, but the firm denied it. However, according to internal employees, layoffs are an indisputable fact. Behind the layoffs is the fact that this old accounting firm is deeply trapped in the Evergrande financial fraud scandal.

“No further details can be provided at this time”

The above-mentioned person familiar with the matter said that PwC's financial services audit business has at least 2,000 employees in mainland China, with Beijing and Shanghai offices as its main centers, covering clients including banks, insurance companies, asset and wealth management companies. In addition, PwC is also considering laying off about 20% of employees in other audit teams and non-audit business lines.

Is this statement true? On July 17, a reporter from Nanduwan Finance interviewed PwC on this issue, and the relevant person responded: "Due to changes in external objective conditions, we have optimized the organizational structure accordingly according to market demand. We have always valued talents and have invested heavily in talent training for many years. This adjustment is a difficult decision. We are gradually communicating with employees and ensuring that the adjustment plan complies with relevant provisions of the Chinese Labor Law. In order to ensure the accuracy and comprehensiveness of the information, we are unable to provide more details at present, please understand."

This is not the first time that PwC has been involved in layoff rumors. On July 10, market sources said, "PwC in Guangzhou is going to close, and basically everyone has to resign within 7 days after N+1. The situation in Shenzhen is normal." "I came down from the meeting room and was notified that I had to resign within 7 days after N+1. Then my computer was locked."

At that time, when interviewed by a reporter from Wancaishe, PwC denied that its Guangzhou branch was closed. However, an internal employee of PwC revealed details and said: "Most of the recent layoffs in PwC are in the audit department, and the audit department has laid off a lot of people. Other departments have also laid off people, but it may be ordinary layoffs, and the number is not large. The audit was because of Evergrande's incident, and because of the thunder, many state-owned enterprises and central enterprises dare not ask PwC for auditing, fearing that their reputation will be bad."

On July 18, an employee who had worked at PwC Guangzhou for only a few years told a reporter from Wan Caishe that he had just been resigned on an N+1 basis and had the opportunity to transfer to another branch to do auditing, "but I don't really want to do that. It's too tiring. I'd like to have a good rest first and then make plans."

In fact, ever since PwC was caught up in the controversy over contract terminations with listed companies, some people have posted on social media platforms that PwC's Guangzhou office has closed, but the firm has denied it.

Recently, when some media visited PwC's Guangzhou branch on the 18th floor of PwC Center in Zhujiang New Town, they found that the business was normal and the on-site staff also said they had never heard that the company was going to close.

Facing multiple pressures after trust declines

Behind the rumors of layoffs at PwC is the fact that this global auditing giant is caught up in internal and external troubles after being embroiled in the Evergrande financial fraud scandal.

As one of the world's top "Big Four" accounting firms, PricewaterhouseCoopers has always been a shining golden signboard, and its professional capabilities are widely recognized. However, in the Evergrande incident, what role did PricewaterhouseCoopers play and whether it was diligent and responsible have always made investors suspicious.

As trust in audit quality and independent assessments declines, PwC has been repeatedly "abandoned" by listed companies since March this year. According to incomplete statistics, at least more than 30 listed companies have terminated or changed their contracts with PwC, including CIMC Vehicles, Qingdao Port, Tsingtao Beer, Dongpeng Beverage, Guangdong Electric Power A, Mindray Medical, etc., with a total amount of lost orders of 500 million to 600 million yuan. Regarding the reasons for the termination of the contract, many listed companies have clearly expressed that it is based on the consideration of "prudence principle" or "prudence principle".

The pressure comes not only from the market, but also from the regulatory level. On May 31, 2024, the fine for the Evergrande Real Estate case was officially issued. The China Securities Regulatory Commission announced that recently, the China Securities Regulatory Commission made an administrative penalty decision on the fraudulent issuance of bonds and illegal information disclosure of Evergrande Real Estate in accordance with the law, ordered Evergrande Real Estate to correct, issued a warning and fined 4.175 billion yuan, and imposed a maximum fine of 47 million yuan on Xu Jiayin, the then chairman and actual controller of Evergrande Real Estate, and took measures to ban him from the securities market for life.

In addition, the CSRC also stated in the notice that it is advancing the investigation of relevant intermediary institutions. Although the results of the investigation have not yet been released, according to the analysis of many legal professionals, if PwC participated in the Evergrande incident, it may face heavy penalties and huge compensation.

At the same time, Hong Kong regulators are also investigating PwC's related audits and have released some of the results of the investigation.

About three months ago, an open letter signed by "a group of PwC partners" circulated online, directly pointing to PwC Asia Pacific and China Chairman Raymond Chao. The open letter stated that in pursuit of high partner income, Raymond Chao brought PwC into the vortex of the Evergrande incident; in addition, behind the audit problems was the fact that audit quality management became a means of internal fighting within PwC. Subsequently, on April 19, the Hong Kong Accounting and Financial Reporting Council (hereinafter referred to as the "Accounting and Financial Reporting Council") stated that it had noticed the relevant complaint letter, and in order to protect the broader public interests involved in the audit of listed entities and to maintain the public's confidence in the integrity of the accounting profession, the Accounting and Financial Reporting Council had the responsibility to launch an investigation.

On July 10, the Accounting and Finance Bureau responded to the whistleblower's allegations against PricewaterhouseCoopers (i.e. PwC Hong Kong) by stating that the evidence collected during the review was insufficient to support three allegations regarding PricewaterhouseCoopers' quality management system, but the investigation into the allegations regarding the audit quality of China Evergrande Group is still ongoing.

PricewaterhouseCoopersAsia Pacific and ChinaChange of leadership

Amid the frequent turmoil, information on PwC's official website showed in early July this year that the position of Chairman of PwC Asia Pacific and China had quietly changed from Raymond Chao to Li Dan.

Li Dan is not an “airborne soldier”. His tenure at PwC China began more than 30 years ago. According to PwC’s official website, he joined PwC in 1993 and became one of the first batch of local fresh graduates recruited and trained by PwC in mainland China.

Li Dan's career path at PwC was quite smooth - about ten years after joining the firm, Li Dan became a partner in 2004. As an audit partner, Li Dan provided services to multinational companies, private enterprises and state-owned enterprises in complex domestic and overseas listing financing and mergers and acquisitions transactions. In 2015, Li Dan was appointed as the chief partner of PwC Zhongtian Accounting Firm (Special General Partnership).

Li Dan has also received many external honors. According to the official website of PricewaterhouseCoopers, Li Dan is a member of the National Accounting Information Standardization Committee, a member of the CPA Examination Committee of the Ministry of Finance, a senior practicing member of the Chinese Institute of Certified Public Accountants, and a former member of the Shanghai CPPCC and vice president of the Chinese Institute of Certified Public Accountants. In 2015, Li Dan was awarded the honorary title of "National Advanced Accounting Worker" by the Ministry of Finance, becoming the first professional among the Big Four international accounting firms to receive this honor.

How to solve the numerous problems? How to restore the declining social trust? On its official website, PwC said that "Li Dan will lead PwC China to deeply practice the corporate mission of 'solving important problems and creating social integrity'". Obviously, PwC has high hopes for the newly appointed Chairman of Asia Pacific and China, and the market is also waiting to see.

Written by: Nanduwan Financial News reporter Wang Yufeng