Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
PwC is set to parachute in a senior partner from the UK to run its business in China, as the fallout from its audit of collapsed property developer Evergrande continues to mount.
The accounting firm’s global leaders have tapped Hemione Hudson, a runner-up in the race to lead PwC UK earlier this year, to lead the scandal-hit China business, according to people familiar with the matter.
Unlike traditional multinationals, PwC operates as a network of independent, locally owned partnerships, so the appointment of an outsider to take charge of a member firm is a highly unusual step.
The intervention underscores the concern within the Big Four firm about the depth of the crisis at PwC China, which has told clients that it expects Beijing to impose a substantial fine and a six-month suspension of its operations as a punishment for failures related to its audits of Evergrande.
The company was China’s largest property developer but Beijing found that it overstated its mainland revenues by almost $80bn in the years before defaulting on its debts in 2021. PwC had been auditing the mainland business and the Hong Kong-listed parent company since as early as 2009.
PwC China’s current boss is Daniel Li, who was previously head of the audit business and was elected by partners late last year to a four-year term that only began on July 1.
PwC’s international leadership imposed another British executive, Kevin Burrowes, as boss of its Australian business last year after a tax scandal severely damaged its reputation there and the fallout threatened to spread to other markets.
Its decision to make a similar move in China is particularly significant given the political sensitivity faced by western brands operating in the country and restrictions on sharing information across borders, even within businesses. The boss of one global consultancy said nobody in his business had full information about its mainland Chinese operations because of the pressure faced by local partners not to share certain information.
It is not known what role Li would hold once Hudson is installed. PwC declined to comment.
PwC China is already shedding staff in anticipation of a substantial financial hit from the Evergrande scandal, and a large number of clients, particularly state-owned enterprises, have dumped the firm as their auditor since the start of this year.
Hudson sits on the firm’s global leadership team as chief risk and regulatory officer, in addition to her job as chief network officer of the UK business. She was on a shortlist of three candidates to lead the UK firm but lost out to Marco Amitrano, PwC UK’s former consulting leader, in a vote of partners in April.
She previously led the UK audit division for five years during a period of significant regulatory upheaval and political scrutiny of the sector as watchdogs forced the Big Four to boost investment in the quality of their work after a series of scandals.
The firm was fined nearly £15mn by the UK accounting regulator during Hudson’s tenure, but mostly for audits that had been carried out before she became head of the division. Competitors and colleagues have described her as highly able and a good communicator.
Her move would add to 18 months of upheaval at the top of PwC, which became fractious at times. The leadership of its global network, as well as its US, UK and Chinese businesses, all changed earlier this year following scheduled elections.
Read the full article here
