PwC to be fined over Evergrande auditing work
PricewaterhouseCoopers (PwC), one of the four largest global accounting firms, is expected to face a fine of at least 1 billion yuan (US$138 million) in China as it stands accused of overlooking misconduct by the collapsed China Evergrande Group for more than a decade.
The auditor will also have some of its local operations in China suspended, Bloomberg reported on Thursday, citing people familiar with the situation.
China’s Ministry of Finance may announce the penalties on PwC as soon as this week, according to the report.
The main responsibility of auditors is to check whether the financial statements of their clients contain false and inaccurate statements, in order to protect their clients’ stock and bond investors.
Since auditors receive audit fees from their clients, they may tempted to skip following the standard code of rules and turn a blind eye to their client’s misstatements. This is why the accounting sector has set up rules for auditors to follow.
If a financial statement provides accurate figures, an auditor can give a standard unqualified opinion, or “clean opinion,” so investors can trust it. If a financial statement contains material misstatements or omissions, an auditor should give a qualified opinion and alert the investors. In an extreme case, an auditor should quit auditing a problematic financial statement.
‘Clean opinions’
PwC had served as Evergrande’s auditor for 14 years between 2009 and 2023. Throughout the years, it had given standard unqualified opinions to Evergrande’s financial statements, meaning that it was stating its belief that each statement gave a true and fair view and complied in all material respects with the relevant financial reporting framework, including applicable law.
Bef