PwC China unit fined, banned for Evergrande audit mishaps.

TLDR:

– PwC’s China unit, PwC Zhong Tian, is facing a record $70 million fine and a six-month ban for alleged failures in auditing China Evergrande Group.

– The penalty, expected to be announced by the end of this month, is the biggest fine ever imposed on a global accounting firm by China’s Ministry of Finance.

Key Elements:

China is preparing to penalise PwC with the biggest fine ever imposed on a global accounting firm for its shortcomings in the audit of bankrupt developer China Evergrande Group.

PwC Zhong Tian could face a fine of up to 500 million yuan (US$70 million) and a six-month ban on taking on new clients and signing off accounts of mainland-based companies.

The penalty is expected to be announced later this month and will be the harshest imposed by the Ministry of Finance on an accounting firm.

PwC Zhong Tian will be banned from accepting new clients for six months until February 2025 and cannot sign off on audit reports of financial statements or new listing reports.

The firm is also facing lawsuits in Hong Kong from the liquidators tasked with recovering and salvaging assets in Evergrande to repay creditors.

Some big clients have already walked away from PwC Zhong Tian, including Bank of China, China Merchants Group PetroChina, and China Railway Group.

Full Article:

China is preparing to penalise PwC with the biggest fine ever imposed on a global accounting firm for its shortcomings in the audit of bankrupt developer China Evergrande Group. PwC Zhong Tian could face a fine of up to 500 million yuan (US$70 million) and a six-month nationwide ban on doing business for its alleged failure in scrutinising the accounts of Evergrande in the years before its eventual collapse in January this year. The penalty, expected to be announced later this month, will be the harshest imposed by the Ministry of Finance on an accounting firm.

PwC Zhong Tian will not be allowed accept new clients for six months until February 2025, and cannot sign off on audit reports of financial statements or new listing reports for its existing customers. The firm’s 10,000-odd employees in 20 local offices may carry out their audits for existing clients during the suspension period. PwC Zhong Tian has informed its clients about the impending penalty in recent days. The firm may still sign off audits for financial statement this year when they will be released in March or April 2025, given that the ban would end by February.

PwC Zhong Tian is also facing lawsuits in Hong Kong from the liquidators tasked with recovering and salvaging assets in Evergrande to repay creditors. The auditing firm was negligent and misrepresented Evergrande’s financial statements for 2017 and the first six months of 2018, according to a March lawsuit that was unsealed by the court this month.

Some big clients have already walked away from PwC Zhong Tian, including Bank of China, China Merchants Group PetroChina, and China Railway Group. Privately owned enterprises are still staying with PwC Zhong Tian, with the firm assuring them of repairing its reputation and serving customers. PwC units outside mainland China are auditors for some of the biggest companies listed in Hong Kong, including top lender HSBC, insurer AIA Group, and WeChat operator Tencent Holdings.