Hong Kong, September 13 – Chinese authorities have imposed a six-month suspension on PwC’s operations and fined the auditing firm more than 400 million yuan (€50.1 million) for its role in auditing the now-bankrupt property developer Evergrande. This marks the harshest penalty yet for an international accounting firm operating in China, according to AFP.
Punishment Details
China’s Ministry of Finance announced on Friday that PwC China will have its operations suspended for six months and face a 116 million yuan (€16.35 million) fine. Additionally, the firm’s illegally obtained profits will be confiscated. In a separate decision, the China Securities Regulatory Commission (CSRC) fined PwC a total of 325 million yuan for failing to exercise due diligence during the audit of Evergrande. The CSRC revealed that 88% of PwC’s records related to real estate projects did not match the actual progress on the ground.
| Entity | Penalty | Amount (CNY) |
|---|---|---|
| Ministry of Finance | Operations suspension and fine | 116 million |
| China Securities Regulatory Commission (CSRC) | Fine and confiscation of illegal profits | 325 million |
PwC’s Involvement in Evergrande’s Collapse
PwC came under scrutiny by Beijing following the January collapse of Evergrande, the world’s most indebted developer and a symbol of the ongoing crisis in China’s property sector. PwC had audited Evergrande for 14 years, up until 2023, consistently providing the company with a clean audit report, despite its mounting financial woes.
Largest Auditing Firm in China
Prior to the suspension, PwC was the largest of the “Big Four” auditing firms operating in China, generating nearly 8 billion yuan in revenue in 2022, outperforming its rivals Deloitte, KPMG, and EY.
| Firm | Revenue in China (CNY, 2022) |
|---|---|
| PwC | 8 billion |
| Deloitte | N/A |
| KPMG | N/A |
| EY | N/A |
Evergrande’s Crisis and China’s Real Estate Troubles
Evergrande’s collapse has had far-reaching consequences for China’s real estate sector, which has struggled with massive debt and regulatory crackdowns. The auditing failures have further fueled concerns over the transparency of financial reporting in China’s property market. PwC’s role in the crisis has placed additional pressure on international auditing firms, highlighting the challenges of operating in the country’s highly regulated financial environment.
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