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PWC has delayed payment for retirement partners recently in Hong Kong and Continent China while sailing on the financial consequences of its role the audit failed to develop the Chinese Evergrand asset.
Some net capital partners who retired in recent months have not yet been repaid any of the capital they contributed to when they joined the partnership, four people with knowledge of the matter said.
The Big Four firm in the past is paid for about half the amount within a few months of retirement, with the rest later, people said. Recent changes mark a delay in the normal repayment schedule and would help the firm save money.
There is no suggestion that by taking more time to repay the money, the PWC has violated its obligations to former partners under the shareholder agreement.
The delays come as the PWC accumulates with the financial consequences of its Evergrand audits, which gave a clean health bill for more than a decade.
Since the development of the developer, the PWC has been fined RMB441MN ($ 62 million) and was banned from doing business for six months by the Continental Chinese authorities, which said the firm “hid or even condemned” fraud in its Evergrand audits.
Although the ban is over, the PWC has lost revenue from Chinese clients who passed to rival auditors, the Financial Times reported in July. He also faces a possible lawsuit by Evergrand liquidants who can handle it at a considerable cost, although judicial registrations did not say how much money the liquidators can sue.
The firm “should have abundant liquidity” amidst the turbulence, said a retired PWC partner lately. Salary delays apply to a wide partnership group, not just those who worked on Evergrand’s audits, people said.
PWC refused to comment on this article.
The firm resigned as Evergrand’s auditor in 2023. In March last year, Beijing accused the developer and its founder Hui had Yan of inflating his income with nearly 80Bn dollars during 2019 and 2020.
At least 66 PWC China partners have left their roles in recent months, the largest wave of departures in five years.
When partners come out, the firm buys their shares in their value, according to the PWC shareholders’ agreement in Hong Kong, seen by FT.
All money must be repaid within 12 months, except up to $ 200,000 HK (US $ 25,640) which can be kept up to 18 months after the date of completion.
Forced capital can reach about 40 percent of the last year’s revenue of partners, which means it is a considerable amount, but it is not usually the main layer of their pension plan, two former partners said.
The repayments can go to the millions of dollars of Hong Kong for some older partners, two people familiar with the situation said.
PWC has been struggling to keep the main clients in China. In addition to banning, Chinese regulations ban state groups and companies listed by the continent from the employment of auditors who have been fined in the past three years of accounting. Some customers ranked in Hong Kong have also dropped PWC in recent months.
The firm’s unit of China lost about two -thirds of its accounting revenue from clients listed on the continent in the first half of last year, FT reported earlier, underlining the degree of consequences from its Evergrand audits.
