PricewaterhouseCoopers LLP (PwC) may soon be slapped with a huge fine from China, possibly the biggest ever, and could suspend some of its local operations due to its involvement in a major alleged financial fraud case, reported Bloomberg.
The Ministry of Finance is planning to announce penalties against PwC as early as this week concerning its auditing work for China Evergrande Group, according to sources familiar with the matter mentioned in the report.
The report cited people aware of the matter saying that PwC could face a fine of at least 1 billion yuan (approximately $138 million).
This fine could set a new record, surpassing the 212 million yuan (approximately $30 million) penalty imposed on Deloitte Touche Tohmatsu Ltd. in 2023.
In addition to the fine, part of the punishment might include suspending operations at some of PwC’s offices in mainland China.
The Ministry of Finance and PwC have not yet given any confirmation regarding the matter.
PwC has been under scrutiny following China’s extensive investigation into financial fraud involving Evergrande, one of the largest cases of alleged financial wrongdoing in the country’s history.
Earlier this year, Chinese authorities fined Evergrande 4.18 billion yuan and accused its main unit, Hengda, of inflating its revenue by 564 billion yuan between 2019 and 2020.
The repercussions for PwC have been tangible, with the company losing several Chinese clients just in May, joining a list of over a dozen firms it has ceased auditing in China over the past two years.
Notable departures from PwC’s client list include China Taiping Insurance Holdings Co., China Merchants Bank Co., and People’s Insurance Company (Group) of China Ltd.
These penalties coincide with President Xi Jinping’s increased efforts to address financial risks and crime in order to stabilise China’s economy.
PricewaterhouseCoopers Zhong Tian LLP, a Shanghai-based firm affiliated with PwC’s global network, served as Evergrande’s auditor during the period in question. However, it resigned in January 2023 due to disagreements related to the audit.
Among the Big Four accounting firms, PwC was frequently engaged by Chinese real estate firms listed in Hong Kong, including auditing some of the nation’s largest developers such as Country Garden Holdings Co. and Sunac China Holdings Ltd., both of which also defaulted on their debts.
PwC’s mainland Chinese arm, comprising over 1,600 certified accountants, generated revenue of 7.9 billion yuan (about $1.1 billion) in 2022, making it the highest earner among more than 9,000 local competitors, as per official data.
However, this figure represents only a fraction of its global revenue, which stood at $50.3 billion during the same year.
Source Agencies
