PwC China fined over Evergrande auditing failures

13th Sep 2024 11:38

(Sharecast News) - PwC China has been fined nearly £50m for auditing failures relating to collapsed property developer Evergrande Group, it was announced on Friday.

The China Securities Regulatory Commission imposed fines totalling yuan 325m (£35m), while the Ministry of Finance announced a yuan 116m fine.

PwC Zhong Tian - commonly known as PwC China - has also been banned for six months.

The Chinese authorities have been probing PwC's involvement with Evergrande since March, after the CSRC accused the stricken developer of a $78bn fraud carried out between 2018 and 2020.

In a statement to Associated Press, the Ministry of Finance said on Friday that PwC China had issued "false audit reports", with "series defects" in the audit procedures leading to a number of false conclusions.

The CSRC told Reuters: "PwC has seriously eroded the basis of law and good faith, and damage investors' interest."

In response, PwC China said it sacked six partners and "exited" five staff directly involved in Hengda audit work. Hengda is the principal subsidiary of Evergrande.

Daniel Li, PwC China's territory senior partner, has also agreed to step down, and financial penalties will now be issued for PwC China's current and former leadership who were responsible for the business.

Hermione Hudson, PwC's global risk and regulatory leader, has been named interim territory senior partner.

Mohamed Kande, global chair of PwC, said: "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.

"That is why...actions were taken to hold those responsible to account.

"China remains an important part of the PwC network and I remain confident in the China firm's partners and staff as we work together to rebuild trust with stakeholders."