Beijing: In a significant milestone, China has banned PwC China, one of the Big Four accounting firms, for six months and penalised it roughly $62 million for alleged auditing violations, according to media reports on Friday.
The action followed a revelation by China’s securities regulator that PwC China cleared the accounting of ailing property business Evergrande, despite the real estate developer “inflated mainland revenues by nearly $80 billion in the two years before its default in 2021,” the Financial Times reported.
According to China’s financial ministry, PwC China and its Guangzhou branch were aware of “major mistakes” in Evergrande’s audit from 2018 to 2020 but neglected to report them.
According to the report, the ministry has ordered the shutdown of PwC China’s Guangzhou branch.
PwC said, “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 terminated six partners and “exited” five staff directly involved in the audit.
“The work performed by PwC Zhong Tian’s Hengda audit team fell well below 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 sources, the punishment exceeds Deloitte’s $31 million fine and three-month partial business suspension imposed last year for “serious audit deficiencies” in its work with China Huarong Asset Management.
The finance ministry said it “imposed administrative penalties on PricewaterhouseCoopers, including a warning, a six-month suspension of its business, and the revocation of its Guangzhou branch.”
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–IANS
