China Slaps PwC with Six-Month Ban and Hefty Fine

Chinese authorities have banned PwC for six months and fined it over 400 million yuan for its role in the audit of collapsed property developer Evergrande. The ban, the most severe yet for international accounting firms in China, comes amid a crackdown on excessive borrowing by developers during a property market slump.

Chinese authorities have slapped PwC with a six-month ban and fined the global accounting giant over 400 million yuan (USD 56.4 million) for its involvement in the audit of collapsed property developer Evergrande.

This marks the heaviest punishment yet for an international accounting firm operating in China. PwC will be barred from certifying any financial results in the country for the duration of the ban, and has already started losing clients.

China's Ministry of Finance announced on Friday that it was imposing 116 million yuan (USD 16.35 million) in fines and confiscating illegal gains from PwC. The sanctions also include a six-month business suspension and revocation of PwC's Guangzhou branch, along with an administrative warning.

The China Securities Regulatory Commission additionally imposed fines and confiscations amounting to 325 million yuan (USD 45.8 million) on PwC for allegedly failing to perform due diligence in the Evergrande audit.

Beijing intensified scrutiny of the auditor following the collapse of Evergrande in January, a major developer burdened with the world's largest debt. The firm's collapse highlighted China's ongoing property crisis.

In March, China's securities regulator claimed Evergrande had inflated its mainland revenues by almost USD 80 billion in 2019 and 2020. The developer was fined USD 577 million in May.

PwC, which had audited Evergrande's accounts for 14 years, was the largest of the "Big Four" accounting firms in China, generating nearly 8 billion yuan (USD 1.1 billion) in revenue in 2022, outpacing Deloitte, KPMG, and EY.

The crackdown is part of broader efforts by Chinese authorities to curb excessive borrowing by developers amid a prolonged property market slump affecting various economic sectors, including construction, building materials, and home appliances.

(With inputs from agencies.)