In what could be a significant development, China has barred PwC China -- part of the Big Four -- for six months and imposed a fine of almost $62 million for alleged auditing lapses, the media reported on Friday. It follows the securities regulator of China reported that PwC China accepted Evergrande's accounts, although the ailing property firm inflated its mainland revenues by nearly $80 billion in the two years leading up to its default in 2021, according to the Financial Times.
China's finance ministry said that PwC China and the Guangzhou branch of the auditor knew "major mistakes" in the Evergrande audit from 2018 to 2020 but did not report them. The ministry report said it shut the Guangzhou branch of PwC China. PwC said in a statement: "we are disappointed by PwC Zhong Tian's (or PwC ZT) audit work of Hengda, which fell unacceptably below the standards we expect of member firms of the PwC network."???
The global audit firm also sacked six partners and "exited" five staff directly involved in the audit.
The work done by the PwC Zhong Tian's Hengda audit team fell completely short of our high expectations and was completely unacceptable. "It is not representative of what we stand for as a network, and there is no room for this at PwC," Mohamed Kande, PwC global chair, was quoted as saying.
According to reports, the penalty is way above the $31 million fine and three-month partial business ban meted to Deloitte last year for "serious audit deficiencies" in its involvement with China Huarong Asset Management. The finance ministry said it "imposed administrative penalties on PricewaterhouseCoopers, including a warning, suspension of its business for six months and the revocation of its Guangzhou branch.".
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