China fines PwC $62 million for its role in the Evergrande collapse

Chinese regulators have 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 Friday that its investigation found that PwC Zhong Tian LLP helped cover up and “even condone” 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 in a statement.

Chinese authorities have been examining PwC’s role in the accounting of Hengda Real Estate since the CSRC accused the developer in March of a $78-billion fraud over a period of two years through 2020.

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.

“We are disappointed by PwC Zhong Tian’s audit work of Hengda, which fell unacceptably below the standards we expect of member firms of the PwC network,” PwC network, the alliance of PwC’s global member units, said in a statement.

The firm said that, as part of its “accountability and remedial actions,” PwC China’s territory senior partner Daniel Li had stepped down and Hemione