① China Life Insurance announced plans to replace Ernst & Young as the company's 2024 auditor, and PricewaterhouseCoopers will no longer cooperate; ② A total of 14 listed companies have cancelled cooperation with PricewaterhouseCoopers, and financial companies already account for one-third; ③ A number of financial institutions mentioned the “principle of prudence” and concerns about certain uncertainties in the reasons for canceling the cooperation.
AFP, June 12 (Reporter Zou Juntao) PricewaterhouseCoopers has lost another major customer.
On the evening of June 11, China Life announced that the company plans to appoint accounting firms Ernst & Young Huaming (“EY”) and Ernst & Young (“EY”). The original appointed accounting firms were PricewaterhouseCoopers Zhongtian (Special General Partnership) and PricewaterhouseCoopers (hereinafter collectively referred to as “PricewaterhouseCoopers”).
On the evening of the same day, China Life Insurance (Group) Co., Ltd., the majority shareholder of the company, had added a temporary proposal to the shareholders' meeting on the matter.
A CFA reporter noticed that China Life Insurance hired PricewaterhouseCoopers to provide audit services for the company in 2021, and has served continuously for 3 years until the end of 2023. This change of employment may have nothing to do with the length of employment.
In addition, the Financial Services Association reporter noticed that since May, a total of 14 A-share listed companies have announced that they will cancel their employment or no longer renew their employment with PricewaterhouseCoopers as the 2024 audit agency. The number of financial companies reached 5, accounting for one-third, including many industry giants such as Haitong Securities, China Merchants Bank, and China People's Insurance.
China Life Insurance also changed jobs, and PwC lost another “10 million level” order
In the announcement, China Life Insurance disclosed the brief reason for the change in the accounting firm. It plans to appoint Ernst & Young as the 2024 financial statements and internal control auditing agency. It mainly takes into account the company's demand for audit services. According to the relevant regulations on the selection and employment of accounting services, it has been determined through the bidding process and based on the bid evaluation results.
According to previous announcements, China Life Insurance disclosed in April 2021 that the company's internal audit agency was changed from Ernst & Young to PricewaterhouseCoopers. The reason for the change in disclosure at the time was that according to the requirements of the “Administrative Measures on the Selection and Hiring of Accounting Firms by State-owned Financial Enterprises”, the accounting firm that was originally hired continuously for 8 years had reached the longest period of continuous employment, and the change had to be made.
According to information, the above regulations require that financial companies continuously hire the same accounting firm (including relevant member units of the accounting firm) for no more than 5 years in principle. If a financial enterprise extends the employment period, the period of continuous employment shall not exceed 8 years.
According to this announcement, PricewaterhouseCoopers provided audit services to China Life for 3 consecutive years after carrying out the 2023 audit work. The Financial Services Association reporter noticed that according to the above regulations, PwC has not yet reached the employment period.
Furthermore, according to the annual report, China Life Insurance paid 64.73 million yuan in compensation to PwC in 2023, an increase of 25.47% over the previous year compared to 51.59 million yuan in 2022.
In the announcement, China Life Insurance stated that Ernst & Young's fees for the company's 2024 audit services will be determined based on factors such as the company's industry, business scale, and complexity of accounting processing, as well as the amount of auditors required for the company's annual audit and workload, based on fair and reasonable pricing principles.
A Financial Services Association reporter noticed that China Life Insurance is currently “expedited” processing matters relating to the change of accounting firms and following the relevant procedures.
On June 11, China Life Insurance held the 39th meeting of the 7th board of directors to deliberate and pass the “Proposal on Hiring the Company's 2024 Auditor”, agreeing to change the appointment of EY Huaming as the Company's 2024 domestic auditor and hire EY Hong Kong as the Company's 2024 Hong Kong Report Auditor.
At the same time, China Life Insurance (Group) issued an announcement. China Life Insurance (Group) Company, a shareholder holding 68.37% of the shares alone or in total, also submitted in writing to the shareholders' meeting convener on June 11 to add two additional temporary proposals to the 2023 Annual General Meeting of Shareholders, including the “Proposal on the Employment of the Company's 2024 Auditor”.
A total of 14 listed companies have “broken up” with PricewaterhouseCoopers, with financial companies accounting for one-third
According to incomplete statistics from the Financial Federation, since May 23, 14 A-share listed companies, including China Life Insurance, China Railway Industry, Haitong Securities, China Merchants Shekou, Bank of Hangzhou, China Petroleum, China Insurance, Ningbo Port, Ningbo Ocean, China Merchants Bank, China Railway, Shanghai Silicon Industries, and Mindray Healthcare, have announced that they will cancel their hires or not renew their appointments with PricewaterhouseCoopers as the 2024 auditor. Among them, listed financial companies account for one-third of the total.
As far as listed banking and insurance companies are concerned, in addition to China Life Insurance, China Merchants Bank announced on May 27 that it intends to appoint Ernst & Young Huaming Certified Public Accountants as the 2024 auditor, and the bank announced on September 27, 2023 that it intends to appoint PricewaterhouseCoopers Zhongtian as the 2024 domestic accounting firm for the company and its domestic subsidiaries.
Furthermore, China People's Insurance Company announced on May 29 that it intends to appoint Ernst & Young Huaming and Ernst & Young as auditors for 2024, and that the original appointments of PricewaterhouseCoopers Zhongtian and PricewaterhouseCoopers will not be renewed. The Bank of Hangzhou announced on June 5 that it will cancel the renewal of PwC as an accounting firm for 2024.
A Financial Services Association reporter noticed that many financial institutions frequently mentioned the “prudential principle” and concerns about certain uncertainties in the reasons for canceling cooperation with PricewaterhouseCoopers.
The Bank of Hangzhou stated in the aforementioned announcement that after negotiations between the company and PricewaterhouseCoopers Zhongtian Certified Public Accountants (Special General Partnership), the board of directors decided to cancel the “Proposal on the Appointment of the 2024 Accounting Firm of Bank of Hangzhou Co., Ltd.”, which was reviewed and approved by the 7th meeting of the 8th board of directors of the company based on the principle of prudence, due to negotiations between the company and PricewaterhouseCoopers Zhongtian Certified Public Accountants (Special General Partnership). The company will hold a separate board of directors and submit it to the shareholders' meeting to consider the 2024 accounting firm.
The Bank of China announced on June 7 that, based on market information, based on prudential principles and taking into account the Bank's business needs, it agreed to adjust the relevant arrangements for continuing to hire PricewaterhouseCoopers Zhongtian Certified Public Accountants (Special General Partnership) and PricewaterhouseCoopers to provide professional services such as reviewing the 2024 Interim Financial Report. The relevant professional service fee is RMB 35 million. It was agreed to start the 2024 external auditor bidding process, and the relevant procedures will be carried out separately for the selection and recruitment plan and results.
A Financial Services Association reporter noticed that the official website of the China Securities Regulatory Commission announced on May 21 that Evergrande Real Estate had illegal facts such as inflating revenue by 564.1 billion yuan in its 2019 and 2020 annual reports, and ordered corrections, warnings, and fines of 4.175 billion yuan. According to data, PricewaterhouseCoopers has cooperated with China Evergrande for 14 years since 2009, and issued standard unqualified audit reports on Evergrande Real Estate's 2019 and 2020 annual reports.