China may impose record fine on PwC over Evergrande auditing work - Hindustan Times
close_game
close_game

China may impose record fine on PwC over Evergrande auditing work

Bloomberg |
May 30, 2024 10:46 AM IST

PwC has been under the spotlight after China launched one of the biggest investigations of financial fraud in history involving developer Evergrande.

China is poised to impose a record fine on PricewaterhouseCoopers LLP and suspend some of the global auditor’s local operations over its role in one of the nation’s biggest alleged financial fraud cases, according to people familiar with the matter.

PwC sign is seen in the lobby of their offices. Part of the penalties could also include a halt of operations at some of PwC’s mainland offices.(Reuters)
PwC sign is seen in the lobby of their offices. Part of the penalties could also include a halt of operations at some of PwC’s mainland offices.(Reuters)

The Ministry of Finance may announce the penalties on PwC as soon as this week over its auditing work for China Evergrande Group, said the people, asking not to be identified discussing a private matter. PwC faces a fine of at least 1 billion yuan ($138 million), the people said. That would exceed the previous record fine for an accounting firm, the 212 million yuan handed out to Deloitte Touche Tohmatsu Ltd. in 2023.

Get ready to catch the final stages of the World Cup only on Crickit. Anytime, Anywhere. Explore now!

Part of the penalties could also include a halt of operations at some of PwC’s mainland offices, the people said, adding the decision isn’t final and the specifics could be subject to change.

Read more: Elon Musk to become a policy advisor if Donald Trump returns to White House?

The MoF and PwC didn’t immediately respond to Bloomberg requests for comments.

PwC has been under the spotlight after China launched one of the biggest investigations of financial fraud in history involving developer Evergrande. Authorities earlier this year levied a 4.18 billion yuan fine against the once high-flying real estate firm and said the company’s main unit, Hengda, overstated its revenue by 564 billion yuan in the two years through 2020.

In May alone, PwC lost a handful of Chinese clients, adding to a list of more than a dozen firms it has stopped auditing in the country in the last two years. China Taiping Insurance Holdings Co., China Merchants Bank Co. and People’s Insurance Company (Group) of China Ltd. were among them.

The penalties come as President Xi Jinping has increased focus on tackling financial risks and crime to stabilize the world’s second largest economy. At a Politburo meeting on Monday, Xi instructed the financial regulators and local governments to implement new rules and make sure financial oversight has “teeth.”

Read more: Emami share price gains 18% to hit 52-week after Q4 results: Should you buy?

PricewaterhouseCoopers Zhong Tian LLP, a Shanghai-registered firm that is part of PwC’s global network, was Hengda’s auditor during the period in question. The firm served as Evergrande’s auditor for more than a decade until it resigned in January 2023 due to what the developer said were audit-related disagreements.

Among the Big Four accounting firms, PwC was one of the most commonly used by Chinese real estate firms listed in Hong Kong, according to data compiled by Bloomberg. It audited the books of some of the nation’s largest developers, including Country Garden Holdings Co. and Sunac China Holdings Ltd., before they also defaulted on their debt.

PwC’s mainland Chinese arm, with more than 1,600 certified accountants, reported revenue of 7.9 billion yuan ($1.1 billion) in 2022, making it the top earner among more than 9,000 local rivals, according to official data. Still, that’s a fraction of its global revenue of $50.3 billion during the year.

PwC has run into trouble in other jurisdictions. In Hong Kong, the city’s Financial Reporting Council said in 2022 that it was looking into Evergrande’s financial statements for 2020 and expanding an investigation of an audit carried out by PwC.

Read more: Sundar Pichai's new challenge: Google Search secret data leaked. What it reveals

The company earlier pledged to boost governance controls in Australia over questions of a serious conflict of interest in leaking government tax plans to its clients. Its UK network was also fined £5.6 million for failures in auditing Babcock International Group Plc.

Elevate your career with VIT’s MBA programme that has been designed by its acclaimed faculty & stands out as a beacon for working professionals. Explore now!

See more

Get latest updates on Petrol Price along with Gold Rate , Today Weather and Budget 2024 at Hindustan Times.

SHARE THIS ARTICLE ON
Share this article
SHARE
Story Saved
Live Score
OPEN APP
Saved Articles
Following
My Reads
Sign out
New Delhi 0C
Tuesday, June 25, 2024
Start 14 Days Free Trial Subscribe Now
Follow Us On