Advertisement

China slaps PwC with record US$62.2 million fine, 6-month ban for Evergrande audit failures

Beijing wants to send a strong message to auditors about their role as gatekeeper, Hong Kong lawmaker Edmund Wong says

Reading Time:4 minutes
Why you can trust SCMP
9
The heavy fine and services ban on PwC shows mainland Chinese regulators want to maintain high auditing standards. Photo: Bloomberg
PwC Zhong Tian, the China unit of the Big Four accounting firm, has been fined a record 441 million yuan (US$62.2 million) and banned for six months from undertaking auditing for its failures in checking the books of bankrupt developer China Evergrande Group.
Advertisement

The penalty, the harshest imposed on any audit firm by China to date, is part of Beijing’s effort to tighten financial regulations and improve market integrity, analysts said.

The PwC unit failed to detect the true financial condition and false accounting of Evergrande from 2018 to 2020, the Ministry of Finance said on its website on Friday.

“PwC Zhong Tian and its Guangzhou unit failed to identify the false accounting treatment of China Evergrande Group’s financial statements from 2018 and 2020, as it did not give an appropriate audit opinion to point out these false accounting treatments,” the statement said.

The China Securities Regulatory Commission (CSRC) also said its investigation found that PWC Zhong Tian helped to cover Evergrande’s fraud and failed in its onsite audit. The company failed to discover that some of the developer’s claimed completed properties were in fact still empty land, the regulator said in a statement.

Advertisement

CSRC imposed a fine of 325 million yuan on PwC Zhong Tian for its failures in 2019 and 2020, representing 10 times its income for the job, while the Ministry of Finance imposed a 116 million yuan fine for its work in 2018, which is five times its income.

Advertisement