Over the Invasion of Ukraine, EY and Deloitte Have Withdrawn Their Russian Activities
Third of the Big Four accounting firms, EY, has said it will close its 4,700-worker business in Russia following the invasion of Ukraine. Announcing on 7 March 2022 that it will split its Russian and Belarus businesses from the rest of its worldwide network, Deloitte also stated that it would cease to conduct business in the two nations. Following the other so-called Big Four firms, KPMG International and PwC, which declared on March 6, 2022, that they would leave the country following the Russian invasion of Ukraine.
“Russian government clients, state-owned firms, or sanctioned entities or people will no longer be served by EY’s global organization, EY said in a statement on LinkedIn. According to the company, it employs around 4,700 people throughout Russia. Punit Renjen, Deloitte’s CEO, said in a statement on the company’s website that the firm employs around 3,000 people in Russia and Belarus. EY also stated that it was providing assistance to 700 Ukrainian employees in the areas of financial support, relocation, transportation, and immigration.
KPMG stated it employed more than 4,500 individuals in Russia and Belarus, while PwC said it employed 3,700 in Russia.
Punit Renjen, global chief executive of Deloitte, claimed that dividing the Russian and Belarusian company was the “correct option,” but that his firm’s 3,000 experts in the countries had “no voice in the activities of their government[s]”.
He stated that Deloitte would “respect our commitments and obligations to global financial markets and different regulatory authorities,” which gave the impression that the company will continue at least some of the work it is already doing in connection with Russia.
As a result of the fact that the Big Four are organized as networks of locally held partnerships that keep the majority of their income within their own nations, it is expected that their businesses in Russia will continue to function as independent companies despite taking on new names.
The Big Four accounting firms have not provided an estimate for how long the separations will take, although employees at two of the firms have estimated that it may take approximately six months due to the intricacy of the legal and practical issues involved.
The newly independent Russian enterprises will be able to operate for clients not only within Russia but also anywhere else in the world. They are not constrained in any way by the western sanctions that have been imposed on hundreds of firms and persons in Russia.
Continuing to be a part of the networks of the Big Four presented potential challenges for the Russian companies because they ran the risk of facing criminal prosecution if they dropped clients in order to comply with the western sanctions that their international colleagues were required to adhere to. According to people working in the industry, auditors in the country are also subject to hefty penalties if they quit from contracts with state-owned entities.
The “Big Four,” who offer accounting and auditing services in addition to tax and advising advice, are normally allowed to refer work to independent firms in nations in which they do not have a physical presence. Accountants and consultants who have stated that they will withdraw their services from the Russian market are expected to be subjected to more scrutiny this week over the specifics of their plans.
References:
Schmidt, G. (2022, March 7). Deloitte and EY join other big companies exiting Russia. The New York Times. https://www.nytimes.com/2022/03/07/business/ey-accounting-russia.html
O’Dwyer, M. (2022, March 7). EY and Deloitte exit Russian operations over Ukraine invasion. Financial Times. https://www.ft.com/content/5b26e0e8-af55-4b33-b55e-4894875c5692
Swissinfo. (2022, March 7). Deloitte, EY, KPMG and PwC All Exit Russia on Ukraine War. https://www.swissinfo.ch/eng/deloitte–ey–kpmg-and-pwc-all-exit-russia-on-ukraine-war/47408084