PwC’s Chinese auditing division has been suspended for six months due to its role in auditing the now-collapsed property giant Evergrande. The accounting firm has also been fined over $62 million (£47 million) by Chinese authorities, who accuse it of helping to conceal fraud at Evergrande, which collapsed in January under a massive debt load.
PwC China acknowledged that its work fell “unacceptably below” the firm’s expected standards and apologized to its clients for the fallout. Authorities claim PwC was aware of “major misstatements” in Evergrande’s financial statements during its audits.
In response, China’s Ministry of Finance has imposed “administrative penalties” and suspended PwC ZhongTian’s auditing services for six months, though its non-audit services remain unaffected. Additionally, the securities regulator has confiscated PwC’s revenue from auditing Evergrande and issued further fines, accusing the firm of undermining legal standards and harming investors.
PwC has since taken steps to address the issues, including dismissing six partners and initiating fines for responsible team leaders.
Five additional staff members have also departed, and Hemione Hudson, PwC’s global risk and regulatory leader, has been appointed to temporarily oversee the Chinese division.
PwC acknowledged that its audit of Evergrande fell “well below” the firm’s expected standards.
“This is not representative of our values as a network, and there is no place for such shortcomings at PwC,” said Mohamed Kande, the firm’s global chair. “Following a thorough investigation, we took decisive actions to hold those accountable.”
He added, “I have full confidence in the China firm’s partners and employees as we work together to rebuild trust with stakeholders.”
PwC China issued a statement saying, “We deeply regret and apologize for the impact this has had on our clients and staff. We are committed to working diligently to regain their trust.”
Evergrande, which developed properties in over 280 Chinese cities and expanded into various sectors, ultimately went into liquidation in January. Chinese authorities have accused Evergrande and its founder, Hui Ka Yan, of inflating the company’s revenues by $78bn (£61.6bn) and imposed penalties and bans on both him and the company.