(Yicai) July 10 -- PwC is letting a lot of staff go from its Guangzhou branch, but is not closing it down, Southern Metropolis Daily reported today as the UK professional services network firm reels from the fallout of a probe by the Hong Kong government into its role in bankrupt developer China Evergrande Group's inflated accounts.

"PwC in Guangzhou is about to close. Almost all staff have been given an extra month's compensation and will be leaving within 7 days. But things in Shenzhen are going well," according to rumors circulating on social media.

Due to changes in the external environment, PwC is making some adjustments to optimize its organizational structure in line with market demand, a company spokesperson said. The adjustments were difficult to make.

PwC is hemorrhaging clients after the company became embroiled in Evergrande's financial fraud case. The Shenzhen-based developer, which used PwC as it auditor for 14 years until 2023, was found by regulators earlier this year to have overstated its revenue for the years 2019 and 2020.

In April, an open letter on the Internet revealed that, due to the pursuit of high income, there were internal audit quality problems at the firm under former PwC Asia Pacific and China Chairman Zhao Baiji in regards to the Evergrande case.

London-based PwC denied the allegations, but the Hong Kong Accounting and Financial Reporting Council launched an investigation into the incident.

Many state-owned enterprises dare not hire PwC, for fear of being tainted by the scandal, the report said, citing a company employee. The audit department has laid off most of its employees, but other departments have not fired so many people, the person added.

The incident has had a devastating impact on PwC's reputation and business. At least 30 mainland listed companies have not renewed their contracts with the firm. Li Dan replaced Zhao as the chairman of PwC Asia Pacific and China on July 1.

Editor: Kim Taylor