Beijing suspends PwC's China unit for six months in record penalty over Evergrande audit
Chinese regulators on Friday hit PwC's auditing unit in mainland China with a six-month business suspension and a record fine of 441 million yuan ($62 million) over the firm's audit of troubled property developer China Evergrande Group.
Delivering a strong rebuke to the Big Four firm, China's securities regulator said its investigation found that PwC Zhong Tian LLP "turned a blind eye" to and "even condoned" Evergrande's fraud while auditing the annual results of the developer's onshore flagship unit - Hengda Real Estate - in 2019 and 2020.
"PwC has seriously eroded the basis of law and good faith, and damaged investors' interest," said the China Securities Regulatory Commission (CSRC) in a statement.
Chinese authorities have been examining PwC's role in Evergrande's accounting practices since the CSRC accused the developer in March of a $78-billion fraud over a period of two years through 2020.
PwC audited Evergrande for almost 14 years until early 2023.
The business suspension and fines are the toughest ever penalty received by a Big Four accounting firm in China, and come against the backdrop of an exodus of clientele and layoffs at the firm in recent months.
The move is set to cloud PwC's prospects in the world's No.2 economy. PwC Zhong Tian, the registered accounting entity and the main onshore arm of PwC in China, was the country's top-earning auditor in 2022, according to the latest official data.
"The cost is enormous in reputation, affecting the ability to get new business in China beyond the fine. In the short run, PwC's market share will decline in China, benefiting the other big three auditing firms," said Gary Ng, Asia-Pacific senior economist at Natixis.
As part of the penalties, PwC Zhong Tian will be barred from