Securities Times reporter Yang Qingwan
PricewaterhouseCoopers, an accounting firm at the forefront of the storm due to Evergrande's financial fraud, recently lost the annual audit projects of listed companies in succession. Last year, the largest audit fee was about 200 million yuan—— Bank of China The audit project was also lost.
According to the statistics of the Securities Times, more than 20 listed companies have terminated the employment of PwC, including Bank of China Haitong Securities 、 China Telecom 、 PetroChina As a result, PwC lost about 500 million yuan in audit fees. From the perspective of termination, the number of lost orders of PwC has accounted for 20% of its annual A-share audit project, and the loss amount has accounted for more than 50%.
According to the analysis of the current competition pattern, in terms of the market share of A-share IPO (initial public offering), although the four well-known international accounting firms are no longer as good as domestic accounting firms, they are still audit firms of many early listed large companies; In the Hong Kong IPO market, PricewaterhouseCoopers (PricewaterhouseCoopers) even accounted for more than one-third of the market. In the future, if PwC continues to lose orders due to punishment, its market share will probably be shared by other accounting firms, and the industry competition pattern will inevitably change.
Loss of orders: nearly 500 million yuan
Recently, PricewaterhouseCoopers has been terminated by several listed companies in succession due to its involvement in Evergrande's financial fraud. More than 20 companies have announced that they will not hire PricewaterhouseCoopers as the accounting firm of 2024, including Haitong Securities PICC , PetroChina China Railway 、 China Merchants Bank And other well-known listed companies.
Although the relevant listed company did not express the reason for not renewing the employment, it implied the concern of renewing the employment, saying that "relevant matters need to be further verified", "based on the principle of prudence" or "the number of years of continuous provision of audit services has reached the specified maximum number of years".
As of June 11, PwC had lost nearly 500 million yuan in audit fees due to lost orders. At present, the tide of termination continues to spread.
On June 11, China Life The announcement said that the annual audit firms PricewaterhouseCoopers Zhongtian and PricewaterhouseCoopers were changed to Ernst&Young (special general partnership) and Ernst&Young Accounting Firm. In 2023, China Life Insurance paid RMB64.73 million to PricewaterhouseCoopers, an increase of 25.47% from RMB51.59 million in 2022. After this change, PwC's tens of millions of projects fell into the hands of Ernst&Young.
It is worth mentioning that the Bank of China audit project, the largest annual audit project of PricewaterhouseCoopers, was also terminated a few days ago. The Bank of China announced that it would renew the employment of PricewaterhouseCoopers Zhongtian and PricewaterhouseCoopers Noble to provide annual audit services, and adjust it to provide services such as review of the 2024 interim financial report, with a related cost of 35 million yuan. In 2023, the cooperation amount between Bank of China and PricewaterhouseCoopers and its member institutions will reach 193 million yuan, including professional service fees for financial statement audit of overseas branches and subsidiaries; In addition, there is a non audit business cost of 14.786 million yuan.
As an internationally renowned accounting firm, PricewaterhouseCoopers has a deep relationship with early large-scale listed companies in mainland China, and many of the cooperation periods are more than 8 years, such as Ningbo Port 、 Guangzhou Shenzhen Railway Etc. Although the Administrative Measures for the Selection and Employment of Accounting Firms by State owned Enterprises and Listed Companies has provisions in principle on the continuous employment of the same accounting firm, there is actually no lack of a 10-year period.
Who is fattened by the lost share?
In the middle of April this year, an open letter questioned the cooperation between PricewaterhouseCoopers and Evergrande, causing widespread concern. PricewaterhouseCoopers immediately issued a statement saying that the content of the letter was untrue, but this failed to calm external doubts.
On May 31, the CSRC announced that Evergrande Real Estate was suspected of fraud in the process of issuing bonds. This incident has hit the reputation of PwC. It is speculated that the regulatory authorities will issue corresponding punishment measures to PwC, and cooperative customers have therefore terminated their contracts.
It is understood that some listed companies have not renewed their contracts with PricewaterhouseCoopers, and have transferred to Ernst&Young, Deloitte, Daxin and other accounting firms to provide audit services. Some listed companies have renewed their bidding. Among them, Ernst&Young, Deloitte and KPMG, three internationally renowned accounting firms, are more likely to win the bid. However, after the listed companies changed their accounting offices, the audit service fees decreased to a certain extent.
For example, after PICC changed to Ernst&Young Huaming Accounting Firm, the total expenses paid for financial statements and internal control audit in 2024 will be 13.5 million yuan, 2.47 million yuan lower than that in 2023; After Guangzhou Shenzhen Railway changed to Deloitte Touche Tohmatsu, the audit fee in 2024 will be 3 million yuan, a decrease of 2.565 million yuan compared with 2023; Mindray Medical After the change of Ernst&Young Huaming Accounting Firm, the service fees for the audit and review of financial statements and internal control audit in 2024 will be 5.38 million yuan, a decrease of 620000 yuan compared with 2023.
Previously, Dahua Certified Public Accountants was punished by the China Securities Regulatory Commission for financial fraud involving listed companies, and was suspended from securities service business for six months and fined 41.32 million yuan. After the punishment was announced, many accounting firms were changed in several planned IPO projects, and many listed companies changed to Tianzhi International, ShineWing and other accounting firms, which caused a great shock in the industry.
The share of Hong Kong stock IPO market tops
Wind data statistics show that by 2023, the business volume of Lixin, Tianjian, Dahua, Zhongxinghua, Rongcheng and other accounting firms ranked the top five according to the number of cooperation with listed companies, while Ernst&Young Huaming, PwC Zhongtian, KPMG, Deloitte&Touche Tohmatsu and other accounting firms ranked the 25th, 31st, 33rd and 38th respectively. However, this ranking data did not consolidate other member institutions of relevant accounting firms.
If ranked according to the number of A-share IPO cooperation in 2023, accounting firms such as Tianjian, Lixin, Rongcheng, Dahua and Baker Tilly International occupy the top five, and PwC Zhongtian has only three A-share IPO projects, which is not dominant. If ranked according to the transaction amount involved in mergers and acquisitions in 2023, the top five are domestic accounting firms such as Dahua, Baker Tilly International, ShineWing, Tianjian and Zhongshen Zhonghuan. Among them, Dahua's market share is more than 5% ahead of Baker Tilly International.
It is worth mentioning that in the Hong Kong stock market, the top five IPO audit firms in 2023 are Robin Hammond&Young (i.e. PricewaterhouseCoopers), Ernst&Young, KPMG, Deloitte Touche Tohmatsu and Hong Kong Lixin Dehao. Among them, there will be 23 IPOs served by Luobingxian Yongdao in 2023, accounting for 35.38% of the market share.
PricewaterhouseCoopers' termination tide continued to ferment. Competitors such as Ernst&Young, Deloitte and KPMG actively seized shares during this period. The market remained highly concerned about whether they could recover in the future. In the future, the market will still focus on the regulatory determination of the responsibilities of intermediaries suspected of Evergrande's financial fraud, as well as the changes in the total audit amount of other enterprises to be IPO and listed companies.
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