PwC China, formally known as PwC Zhong Tian LLP, is set to face a six-month suspension in its securities-related business operations, according to multiple sources familiar with the matter. This unprecedented penalty stems from the firm’s auditing practices for the beleaguered property developer, Evergrande.
The anticipated suspension, expected to commence soon, marks the most severe penalty ever imposed on a Big Four accounting firm in China. Alongside the suspension, PwC is also facing a substantial fine estimated at around 400 million yuan (approximately $56 million). This fine and suspension come as a response to significant deficiencies identified in PwC’s handling of Evergrande’s financial audits. PwC Zhong Tian has been under intense scrutiny since Evergrande’s alleged $78 billion fraud surfaced earlier this year. The firm audited Evergrande for nearly 14 years, until early 2023. The penalties, managed primarily by the Ministry of Finance (MoF), will severely restrict PwC’s ability to conduct critical securities-related services, including the signing off on financial statements and IPO applications for clients in mainland China.
The financial repercussions are compounded by the broader impact on PwC’s operations. Recent reports suggest that the impending sanctions have already triggered a client exodus, with numerous firms, including state-owned enterprises and financial institutions, severing ties with PwC. Notably, the Bank of China has announced plans to transition its auditing services to Ernst & Young (EY) for its 2024 audit. The Jogighopa logistics park is poised to become India’s first operational Multi-Modal Logistics Park. This development is part of the Bharatmala Pariyojana, which aims to enhance logistics infrastructure across India. The Jogighopa project is expected to significantly bolster the efficiency of cargo handling in the region.
Previously, Deloitte’s Beijing branch faced a three-month operational suspension and a 211.9 million yuan fine in March 2023, following deficiencies in its audit of China Huarong Asset Management. PwC’s forthcoming penalties reflect the increasing regulatory pressure on auditors in China, particularly concerning their roles in high-profile corporate scandals. The outcome of this regulatory action is likely to shape the future of PwC’s operations in China, as well as set a precedent for how regulatory bodies handle auditing failures within the country’s rapidly evolving financial landscape.
