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PwC China Suspended for Six Months, Fined $62 Million Over Evergrande Audit Scandal

Chinese Regulators Hit PwC with Record Fine for Evergrande Fraud Cover-Up

PwC China Faces Business Suspension and Huge Fine Amid Evergrande Fraud Investigation

 Chinese regulators have punished PwC’s auditing unit in mainland China by suspending its business for six months and giving it a record fine of 441 million yuan ($62 million). This punishment is related to PwC’s audit of the troubled property company China Evergrande Group.

China’s securities regulator said that PwC Zhong Tian LLP helped hide and even allowed Evergrande’s fraud during their audit of the company’s onshore unit, Hengda Real Estate, in 2019 and 2020.

The China Securities Regulatory Commission (CSRC) said that PwC broke the law, hurt investors, and damaged trust.

PwC has been under investigation since March after Evergrande was accused of a $78 billion fraud over two years up to 2020. The penalty on PwC is the largest ever for a Big Four accounting firm in China. The company has been losing clients and laying off staff in recent months.

PwC’s future in China, the world’s second-largest economy, is now uncertain. PwC Zhong Tian was the highest-earning auditor in China in 2022. PwC’s global network said they were disappointed by PwC Zhong Tian’s work on Hengda, which did not meet the expected standards. As a result, PwC China’s top partner, Daniel Li, resigned, and Hemione Hudson, PwC’s global risk leader, took his place.

The six-month business suspension was given by China’s Ministry of Finance. The ministry also fined PwC Zhong Tian 116 million yuan ($16 million) for their mistakes in auditing Hengda in 2018. The CSRC also took back 27.7 million yuan in revenue that PwC made from Evergrande’s audit and fined the company an additional 297 million yuan.

The CSRC said PwC helped hide Evergrande’s financial fraud and needs to be punished.

In recent months, more and more Chinese clients, mostly state-owned businesses and financial companies, have stopped working with PwC. Earlier this year, PwC had about 400 Chinese clients, including big names like Alibaba and Tencent. By March, more than 50 companies, including the Bank of China, had dropped PwC as their auditor or canceled plans to hire them.

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