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

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The heavy fine and services ban on PwC shows mainland Chinese regulators want to maintain high auditing standards. Photo: Bloomberg

Enoch Yiu

Published: 5:18pm, 13 Sep 2024Updated: 6:26pm, 13 Sep 2024

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.

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.