PwC Faces Record Fine and Suspension Over Evergrande Audit in China

Chinese regulators fined PwC's mainland China unit 441 million yuan ($62 million) and imposed a six-month suspension related to its audit of China Evergrande Group. PwC was accused of condoning financial fraud. The penalties impact PwC's future business prospects in China, especially among state-owned and domestically-listed companies.

Chinese regulators hit PwC's mainland China unit with a six-month suspension and a record fine of 441 million yuan ($62 million) on Friday over the firm's audit of failed property developer China Evergrande Group. Delivering a strong rebuke to the Big Four firm, China's securities regulator said its investigation found that PwC Zhong Tian LLP "turned a blind eye" to and "even condoned" Evergrande's fraud while auditing the annual results of the developer's onshore flagship unit - Hengda Real Estate and assisting its bond issuance - in 2019 and 2020.

"PwC's behavior goes beyond mere auditing failure. It, to a certain extent, covered up and even condoned Hengda Real Estate's financial fraud and fraudulent issuance of corporate bonds," said the China Securities Regulatory Commission (CSRC) in a statement. Chinese authorities have been examining PwC's role in Evergrande's accounting practices since the CSRC accused the developer in March of a $78-billion fraud over a period of two years through 2020.

PwC audited Evergrande for almost 14 years until early 2023. The business suspension and fines are the toughest ever received by a Big Four accounting firm in China, and come against the backdrop of an exodus of clientele and layoffs at the firm in recent months.

(With inputs from agencies.)