PwC overcomes China and Australia setbacks in record year

A tax leak scandal in Australia and its role in the collapse of a Chinese property developer cost PwC hundreds of millions of dollars in lost fees last year, although its global army of accountants and consultants still made more money than ever.
Global revenues at the Big Four firm rose 4.3 per cent to a record $55.4 billion in the 12 months to the end of June, up from $53.1 billion in its previous financial year.
PwC does not disclose a global profit figure but confirmed that its annual operating profits increased 1 per cent, a slowdown from the 3.1 per cent rise in profits it reported in the year before.
The group was formed by the merger of Price Waterhouse and Coopers & Lybrand in 1998, although its roots date back to 1849 when Samuel Lowell Price set up his own accountancy firm in London.
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It is now one of the biggest networks of firms in the world, with 370,000 people across 149 countries working under the PwC brand. Its 1,000 or so partners in the UK were paid £862,000 on average last year.
That PwC was able to record a record global performance last year came despite a poor showing in its Asia-Pacific business, where revenue declined 7.1 per cent to $9.3 billion. Profits in the region took an even greater beating, dropping 12.7 per cent.
The firm’s reputation, particularly in that part of the world, has been tarnished over the past year after a partner in its Australian tax team tried to use confidential information about changes to the country’s tax policy to woo technology companies. As part of the fallout from that saga, PwC sold its government consulting business in Australia.
In China, the firm lost a number of large audit clients after regulators ruled that PwC made “major mistakes” when signing off the accounts of Evergrande, a heavily indebted property developer that is now being liquidated.
PwC’s China business was hit with a record fine and given a six-month ban from auditing clients for failing to identify that Evergrande had overstated its sales by almost $80 billion between 2018 and 2020.
Mohamed Kande, PwC’s global chairman, accepted that some of the firm’s work over the past year was “not representative of what we stand for”. He added: “We know that in order to earn and maintain the trust of our stakeholders we need to take a hard look at ourselves and be transparent when we don’t get it right.”
In its other two regions, PwC’s revenues grew. Performance was strongest in Europe, the Middle East and Africa (EMEA), which enjoyed an 11.2 per cent increase in revenues to $21.7 billion, while revenue in the Americas, its largest unit, rose 3.4 per cent to $24.3 billion.
Like its rivals, PwC has had to contend with a prolonged slowdown in its consulting arm as geopolitical and economic uncertainty have prompted clients to rein in their spending on external advisers.
Revenues in PwC’s global advisory division, its biggest service line, rose 3.1 per cent, compared with increases of 4 per cent and 7.1 per cent in its assurance and tax businesses respectively.
“It’s been a year full of successes and challenges,” Kande said. “Despite a backdrop of economic headwinds, we’ve seen revenue growth across all of our lines of business. I am proud of what our 370,000 people have accomplished this year.”