Accounting giant PwC was banned in China on Friday for six months and fined $62.2 million over problems with its control of beleaguered real estate firm Evergrande.
The moves by Chinese regulators mark the latest development in a crackdown on PwC over its work with Evergrande, which has become emblematic of a protracted debt crisis in the country’s real estate sector.
In Friday’s announcements, regulators hit out at PwC for failing to identify and draw attention to serious financial problems within Evergrande — once China’s biggest real estate company — ahead of its 2021 bankruptcy.
“After investigation, it was found that PricewaterhouseCoopers and its Guangzhou branch knew that there were material inaccuracies in Evergrande Real Estate’s financial statements during the audit,” China’s finance ministry said in a statement.
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The ministry added that it had imposed administrative sanctions on PwC that included “suspending its operations for six months and recalling its Guangzhou branch”.
In a separate statement on Friday, China’s top securities regulator said it had sanctioned PwC, while another fine coordinated with the finance ministry brought the total to 441 million yuan ($62.2 million).
The statement said the sanctions were because the company “failed to perform due diligence” on its work involving Evergrande.
PwC “failed to maintain due professional skepticism, failed to make sound professional judgments and failed to discover the financial fraud of Evergrande Real Estate, which was of a large scale and of a large proportion,” he added.
In response, PwC said its auditors in China had fallen “unacceptably below standards” during their work with Evergrande.
“After a thorough investigation, we have ensured that steps are taken to hold those responsible accountable, and a comprehensive remediation program will create a stronger PwC China firm for the future,” PwC Global President Mohamed Kande said in a statement on the firm’s website.
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“China remains an important part of PwC’s network and I remain confident in the Chinese firm’s partners and staff as we work together to rebuild trust with stakeholders,” Kande added.
Last month, Evergrande’s liquidators filed a lawsuit against PwC in Hong Kong, part of an effort to recover investments after a court ordered the property company into liquidation, according to a Bloomberg report.
The lawsuit targeted PwC’s “negligence” and “misrepresentation” in connection with reports on Evergrande’s financial statements for 2017 and the first half of 2018, according to the report.
Source: AFP