PwC Faces Historic Punishment Over China Evergrande Audit

Chinese regulators have suspended PwC's auditing unit in China for six months and fined it 441 million yuan over its audit of China Evergrande Group. The penalties come after accusations that PwC helped cover up Evergrande's fraud, leading to an exodus of clients from PwC in China.

Chinese regulators have dealt a significant blow to PwC's auditing unit in mainland China, slapping it with a six-month business suspension and a record fine of 441 million yuan ($62 million). The penalties, the harshest ever imposed on a Big Four accounting firm in China, stem from PwC's audit of troubled property developer China Evergrande Group.

The China Securities Regulatory Commission (CSRC) found that PwC Zhong Tian LLP had a hand in concealing and even condoning Evergrande's fraudulent activities while auditing the annual results of the developer's flagship unit, Hengda Real Estate, in 2019 and 2020. "PwC has seriously eroded the basis of law and good faith, and damaged investors' interests," the CSRC stated.

The suspension and fines arrive amid an exodus of clients and layoffs for PwC in China, further jeopardizing the firm's prospects in the world's second-largest economy. PwC was the top-earning auditor in China in 2022 but now faces a cloudy future. Alongside the suspension, PwC's territory senior partner Daniel Li has stepped down, handing the reins to global risk and regulatory leader Hemione Hudson.

(With inputs from agencies.)