China’s accounting firm PwC has been hit with a hefty ban and fine following fraudulent practices during the audit of collapsed property developer Evergrande. The firm has been banned from signing off on financial results in the country for six months and fined over 400 million yuan (€50.86m). The penalty includes fines from both the Ministry of Finance and the China Securities Regulatory Commission for serious defects in PwC’s work, including a lack of professional skepticism and failure to point out errors. PwC has responded by firing six partners and five staff directly involved in the audit and is issuing financial penalties for current and former leaders responsible for the business.
Evergrande, the world’s most indebted developer, collapsed in January, leading to scrutiny of PwC’s audits. The securities regulator found that Evergrande had inflated revenues by almost $80bn in 2019 and 2020. PwC had audited Evergrande for 14 years until 2023, giving it a clean bill of health before its collapse. Despite being the largest of the “big four” accounting firms operating in China, PwC is facing severe consequences for its role in the Evergrande scandal.
China’s crackdown on excessive borrowing by developers amid a property market slump has affected various sectors of the economy. PwC’s ban and fine serve as a warning to other international accounting firms operating in China to uphold professional standards and avoid fraudulent practices. PwC’s global chair Mohamed Kande has acknowledged the firm’s shortcomings and assured full cooperation with regulators to comply with the administrative penalties.
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