PwC, the auditor of bankrupt Chinese property developer Evergrande, may soon be banned in China.
The Chinese unit of the Big Four accounting firm has told clients it expects authorities to impose a six-month business ban as early as next month, the firm said. The Financial Times reports.
Beijing is reportedly considering imposing a massive fine on PwC in addition to the business ban. The fine could reach 1 billion yuan ($140 million), Bloomberg reported in May, which would be the largest fine ever imposed on an auditing firm in China.
Regulators are scrutinizing PwC over its role in auditing China’s troubled Evergrande Group, the property developer that has become the poster child for China’s real estate crisis. In March, authorities accused Evergrande of inflating its revenue by nearly $80 billion in 2019 and 2020.
In 2021, Evergrande defaulted on its debts, helping to trigger China’s ongoing property crisis that continues to weigh on the economy. A Hong Kong court ordered Evergrande’s liquidation earlier this year. Evergrande’s liquidators have reportedly filed a lawsuit against PwC China, accusing the auditor of “negligence.”
According to the The Financial Times, A ban would prevent PwC from signing off on financial results and IPOs, and carrying out other regulated activities.
A PwC China spokesperson said it was not appropriate to comment on an ongoing regulatory matter.
Clients are already moving away from PwC China, which was the country’s top auditing firm as recently as March. In a statement released Monday evening, state-owned Bank of China announced it would switch to EY for its auditors.
The loss of clients is said to have led to job losses and salary cuts in PwC’s China practice.
PwC’s troubles in China are just the latest crisis for the global audit firm. Last October, the CEO of PwC’s Australian division apologized to the Australian government for leaking confidential government tax plans to U.S. clients. PwC’s Australian unit cut more than 600 jobs in the wake of the tax leak scandal and sold its consulting business to the government for A$1 ($0.67).
Then, in December, a U.S. regulator fined PwC $7 million after finding that more than 1,000 of the auditor’s China-based employees had cheated on internal training exams related to U.S. auditing practices.
