Russian State-Owned Companies Renouncing Big Four Audit Firms
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Russian state-owned companies are freezing relations with the so-called Big Four audit firms KPMG, PricewaterhouseCoopers (PwC), Deloitte and Ernst & Young (EY).
MOSCOW, November 19 (Sputnik) – Auditors from KPMG, PricewaterhouseCoopers (PwC), Deloitte and Ernst & Young (EY) are facing a decline in demand for their services from a number of Russian state-owned companies, Russian newspaper Kommersant reported Wednesday.
"There is an implicit recommendation to the state-owned companies to suspend their work with international auditors and consultants," Kirill Altukhov, partner at KPMG's Russia and the CIS audit department, was quoted as saying by the newspaper.
The news that the state enterprises are freezing relations with the so-called Big Four audit firms – KPMG, PwC, Deloitte and Ernst & Young – came on Tuesday at a meeting of the Financial and Accounting Consultants (FBK) economic club, one of Russia's leading national audit and consulting groups.
"Indeed, there has been a sort of internal tacit order to the heads of several state-owned companies. Some of them are already involved in talks with the Russian auditors on conclusion of contracts on audit accounting for 2015," Altukhov added.
One of the undisclosed Russian audit companies also confirmed this information to business daily Kommersant.
The main industry avoiding working with Western auditors and consultants is the military-industrial complex, the undisclosed interviewee was quoted by the newspaper as saying. A spokesperson of state corporation Rostec, which promotes the development, production and export of high-tech industrial products for civil and defense use, told Kommersant that no instructions prohibiting work with foreign auditors were received.
Two top-managers from the Russian defense industry informed Kommersant that some companies are refusing to cooperate with the Big Four auditors, the largest international professional services networks. However, they insisted that it was an independent decision taken by the companies, adopted because of fears of possible leaks of strategically important data.
"A number of state-owned companies, especially in the defense industry, now do not simply have access to external markets and in the short term, will not probably get one. That is why, they do not need more expensive audit," Alexander Turbanov, the president of the central council of Russia's Audit Chamber, told the newspaper, explaining the rupture of relations with the Big Four because of reasons linked to economic expediency.
The above-mentioned audit firms have already seen restrictions placed on their activities in Russia since the end of August.
According to Russian newspaper Vedomosti, the issue was about prohibiting them from working with state secrets. In the middle of November, State Duma deputies, Igor Lebedev, Yaroslav Nilov and Andrey Svintsov, all from the Liberal Democratic Party of Russia, offered to amend the law "On audit activities" and prohibit foreign companies to conduct the audit of enterprises with state participation.
Meanwhile, the Big Four still have the lion's share of the Russian market. The Big Four currently makes up 42.6 percent of the Russian audit industry, the Finance Ministry reported.
KPMG is one of the largest professional services companies in the world. Its global headquarters is located in Amstelveen, the Netherlands. The name "KPMG" was chosen when KMG (Klynveld Main Goerdeler) merged with Peat Marwick.
PwC is the world's second-largest professional services network, as measured by 2014 revenues. It is a network of firms in 157 countries with more than 195,400 employees.
Deloitte is the brand under which tens of thousands of professionals in independent firms throughout the world collaborate to provide audit, consulting, financial advisory, risk management and tax services. These firms are members of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee ("DTTL").
Ernst & Young (EY) is a multinational company headquartered in London, United Kingdom. It has 190,000 employees and more than 700 offices in over 150 countries.
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Ernst & Young, KPMG, PricewaterhouseCoopers (PWC), Russia