new York After KPMG and PwC, the auditing company EY is also separating from its Russian business. The company announced this on Monday. EY will separate its Russian member firm from the global network. PwC and KPMG are doing the same. A similar decision is expected shortly at market number four, Deloitte.
“As a result of the Russian government’s invasion of Ukraine, we have decided that PwC should not have a member firm in Russia under these circumstances,” PwC said. The company has been active in Russia for 30 years and has 3500 employees there. EY employs 4,700 people in the country, while KPMG has 3,700.
The large auditing companies are not integrated groups with foreign subsidiaries, but are organized as networks. Each national company is legally independent and owned by the partners, but is bound by the strategy, the brand image and the principles of the global organization.
The now separated Russian member companies of the “Big Four” will be able to continue working under a different name and with their own organization. However, they will no longer be able to fall back on the resources of the other national companies.
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As a result, the independent local units will lack a decisive advantage: The “Big Four” are booked by almost all international corporations because they have branches in all parts of the world and enough specialists and can therefore support customers in the balance sheet audit from a single source. The same applies to large consulting projects.
Russian companies now need many partners
The final audit of a globally active company is practically impossible without its own auditor capacities in the most important economic regions of the world. For a Russian company with international ambitions, this means that instead of being audited globally by PwC or EY, the company and its Russian audit firm would have to look for new audit partners locally in each country.
PwC’s clients in Russia have included Sberbank and the oil company Gazprom. EY said it will no longer serve Russian government clients, state-owned companies, or sanctioned organizations and individuals anywhere in the world. The separation from the Russian organization is “heartbreaking”, as the more than 4,700 employees have worked side by side with global, Eastern European and Ukrainian colleagues for years.
Last week, several large management consultancies from Russia announced that they would be ending their business in Russia, including McKinsey, Boston Consulting Group and Accenture. They no longer want to accept new business, but only complete ongoing projects. McKinsey alone supports 21 of the 30 largest companies in Russia.
More: McKinsey, BCG, Accenture: Consultancies withdraw from Russia