PwC China has faced severe penalties following an inspection by Chinese regulators regarding its audit of Evergrande, a property developer that has been embroiled in a financial crisis. The China Securities Regulatory Commission (CSRC) imposed a six-month business suspension on PwC Zhong Tian LLP and fined the firm approximately 441 million yuan (around $62 million) for its failure to properly audit Evergrande’s finances. This marks one of the largest fines ever issued to a Big Four accounting firm in China
The CSRC’s investigation revealed that PwC’s audits were severely flawed, with 88% of its observations about Evergrande’s projects being fabricated or inaccurate. PwC reportedly issued unqualified audit reports while being aware of discrepancies in Evergrande’s financial reporting, which included overstating revenues by $78 billion between 2018 and 2020
In response to the penalties, PwC acknowledged that its work fell below expected standards and stated its intention to comply with the regulators’ decisions. The fallout from this scandal may lead to further scrutiny of PwC’s operations in China and could serve as a cautionary tale for other firms regarding auditing standards and ethical practices.