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Deloitte Joins the Rest of the Big 4 to Cut Ties With Russian Clients

Posted on by Jason Bramwell

Well that’s that. All Final Four Horsemen of the Accounting Apocalypse have now announced they are abandoning their operations in Russia in response to Vlad Putin’s war against Ukraine. PwC and KPMG announced on Sunday they were cutting ties with their member firms in Russia, EY released a similar statement earlier this morning, and Deloitte spoke about it leaving Russia in a statement from Global CEO Punit Renjen a little more than an hour ago.

Renjen said:

Last week, Deloitte announced it was reviewing its business in Russia. We will separate our practice in Russia and Belarus from the global network of member firms. Deloitte will no longer operate in Russia and Belarus.

While we know this is the right decision, it will have an impact on Deloitte’s ~3,000 professionals located in Russia and Belarus. Like others, we know our colleagues in Russia and Belarus have no voice in the actions of their government. We will support all impacted colleagues during this transition and do all we can to assist them during this extremely difficult time.

We will continue to prioritize the needs of our people and clients while we bring the full strength of Deloitte’s global resources to bear in addressing the mounting humanitarian needs in Ukraine and across Europe.

We will honor our commitments and obligations to global financial markets and multiple regulatory bodies.

A couple takeaways from Renjen’s statement:

  1. Deloitte joins KPMG as publicly saying they not only are severing ties with their affiliates in Russia but also in Belarus, a country that has been a key ally to Russia during its invasion of Ukraine. While PwC’s statement doesn’t mention Belarus, the Financial Times reported yesterday that PwC Belarus was also leaving the firm’s network. EY’s official statement didn’t mention the status of its firms in Belarus.
  2. While EY’s statement this morning said the firm “will no longer serve any Russian government clients, state-owned enterprises or sanctioned entities and individuals anywhere in the world,” Deloitte’s statement today doesn’t say that—and neither did the statements released by PwC and KPMG yesterday. However, in a statement on March 2, Deloitte did say it “does not serve any entities of Russia’s Central Government.”

So now that the Big 4 and Grant Thornton have said they are exiting Russia, who’s next among the top global accounting firms with offices in Putinville? BDO? RSM (this might have already happened; still working on confirmation)? Mazars? Crowe? Baker Tilly?

Related articles:

EY Joins Big 4 Exodus From Russia
Reports: PwC Is Withdrawing From Russia and Belarus
KPMG Is Pulling the Plug On Its Operations In Russia and Belarus
Big 4 Firms Condemn Russia’s Invasion of Ukraine, But Will They Sever Relationships With Any Russian Clients?
Grant Thornton Drops Its Russian Affiliate Over Conflict In Ukraine
Ex-Big 4 Partner On Why the Big 4 Firms Should Pull Out of Russia: ‘It’s the Right Thing to Do and You Know It’

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PwC, Deloitte Enjoying Their Booming Advisory Businesses, Thankyouverymuch

This morning we linked to a Reuters report about the horse race between Deloitte and PwC for the biggest of the Big 4. It reports virtually nothing new that we haven’t discussed here already including Deloitte jumping P. Dubs last year by a whopping $9 million (thanks mostly to keeping their consulting business in house), the hiring sprees, the acquisitions, and oh! the audit business sucks:

With audit revenues leveling off in developed markets, the firms have been making a push in growing countries such as China and India and plowing ahead with investments in consulting, where business is growing after a recessionary slump.[…] The big four are expected to report their fiscal 2011 revenues in coming weeks and any significant growth will likely once again be in the consulting area, said Jonathan Hamilton, managing editor of Accounting News Report. “The audit business, while certainly the staple of all these firms, is a slow-growth business,” Hamilton added.

In other words, the consulting advisory business is hot and audit is not. And what causes some people to fly off the handle is how the firms have sold everyone on the idea that they can still miraculously be the bastion of good business principles ethics. Well, maybe not everyone:

More worries loom from stepped-up regulatory scrutiny. As consulting revenues grow, complaints are surfacing again that firms will be tempted to go easy on audit clients for the sake of winning or keeping a consulting job — a charge the audit firms deny.

Last week, European Union lawmakers approved a report that calls for barring auditors from providing audit and non-audit services to the same client. The report is nonbinding but could shape a draft law in the works.

PwC and Deloitte both said there was no conflict of interest in the consulting services they provide. Much of their consulting is done for companies they do not audit and they follow regulators’ standards and companies’ own restrictions on the kind of consulting they do for audit clients.

The report doesn’t mention many things that have cropped up (some recent, some not so much) including the nearly 500 reprimands Deloitte had in 2009, the rash of insider trading, or PwC’s incestuous Satyam scandal but talking points are also used to address those issues. These firms didn’t get to where they are without figuring out how to play the media game.

One thing is for sure – the firms are going to depend on their consulting/advisory businesses for growth until someone banishes audit firms from offering any other services at all. And God knows what that will take.

In close race for No 1, Deloitte, PwC grow apace [Reuters]

2 thoughts on “Deloitte Joins the Rest of the Big 4 to Cut Ties With Russian Clients”

  1. What does it say that Deloitte is the last to pull out? *cough not a leader*
    What does it say that Punit Renjen, Deloitte’s CEO was the only one who didn’t speak about ESG at Davos 3 years ago? Again *not leading by example*

  2. All the press releases were in a 24 hour block. You really differentiate firms by how the speed of their editing cycle and publication process? Pffft.

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