CHINA: Chinese regulators have imposed PwC’s auditing unit a fine of 441 million yuan ($62 million) coupled with a six-month suspension over the firm’s involvement in auditing property developer China Evergrande Group.
China’s securities regulator said that according to its investigation, PwC Zhong Tian LLP had helped cover up and condone Evergrande’s fraud when it audited the annual results of the developer’s unit, Hengda Real Estate, in 2019 and 2020.
Auditor PricewaterhouseCoopers (PwC)’s essential role the grand failure of Chinese property developer Evergrande.https://t.co/qu8yg8Yp5A
— Thomas Pogge (@ThomasPogge) September 13, 2024
The Chinese Securities Regulatory Commission (CSRC) said, “PwC has seriously eroded the basis of law and good faith and damaged investors’ interest.”
The suspension and fines are the severest penalty ever given to one of China’s Big Four accounting firms. Before this scandal, PwC Zhong Tian’s registered accounting entity and main onshore arm of PwC in China was the country’s top-earning auditor in 2022.
PwC network, which is an alliance of the PwC’s global member units, issued a statement saying, “We are disappointed by PwC Zhong Tian’s audit work of Hengda, which fell unacceptably below the standards we expect of our member firms of the PwC network.”
As part of its accountability actions, the company’s territory senior partner, Daniel Li, has stepped down. His role will be taken over by the firm’s global risk and regulatory leader, Hemione Hudson.
The Ministry of Finance also fined PwC Zhong Tian 116 million yuan ($16 million) for its auditing failure of Hengda in 2018.
In another statement by the CSRC, it announced that it had confiscated PwC Zhong Tian’s revenue in the Evergrande case to 27.7 million yuan and fined the firm 297 million yuan.
“PwC has, to a certain extent, covered up and even condoned Evergrande’s financial fraud and fraudulent issuance of corporate bonds. It (PwC) has to be severely punished according to law,” said the CSRC in a statement.
The firm has 400 Chinese clients listed in China, Hong Kong, and New York, including tech giants Alibaba and Tencent.
However, according to a Reuters report, more than 50 Chinese firms, including the Bank of China, have either dropped PwC as their auditor or cancelled their plans to hire the firm.
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