TMTPost--ChineseregulatorsslapPricewaterhouseCoopersLLP(PwC)withrecordfinesandatemporaryoperationbaninChinaoveritsinvolvementinauditofChinaEvergrandeGroup(Evergrande),acollapsedpropertydeveloperthatwasaccusedofaUS$78billionfraud.
Credit：PwCChina
ChinaSecuritiesRegulatoryCommission(CSRC)announcedFridayanadministrativepenaltyonPwC’sauditingunitinChinaforfailingtoliveuptoitsobligationsinauditingannualreportsandbondissuanceofEvergrandeRealEstateGroup,',bringingthetotaltoRMB325million(US$45.8million),which,accordingtothecommission,wasa"record-breaking"punishmentagainstauditingfirms.
Aseparateregulator,China’sMinistryofFinance(MOF)saiditimposedfinesandconfiscationstotalingRMB116million(US$16.35million),aswellasasix-monthbusinesssuspensiononPwCZhongTi$62millionintotal,wasChina’scountry’giventoDeloittein2023.
ThepenaltycomesasPwCfailedtomeetitsauditingresponsibilitiesfor2019and2020annualreportsandbondissuanceofEvergrandeRealEstateGroup,9rocess,didnotmakecorrectprofessionaljudgments,andfailedtodetectsignificantandwidespreadfinancialfraud,thesecuritiesregulatorsaid.
Theseverep’ations,theCSRCsaidinastatementonMay31,2024.,orhalfofthetotal,,saleswereinflatedby350billionyuan,%
TheCSRCclaimed,inastatementFriday,PwCZhongTianhadsuchextremelyineffectiveon-siteinspectionsthat88%oftherecordskeptbythefirmregardingtherealestateprojectswereinconsistentwiththeactualimplementationandwereseriouslyunreliable."PwC',itcoveredupandevencondonedEvergrandeRealEstateGroup'sfinancialfraudandfraudulentissuanceofcorporatebonds,"saidtheCSRC.
TheMOFsaidbothPwCZhongTiananditsGuangzhoubranchwereawareof"materialmisstatements"intheauditofthedeveloperbetween2018and2020butfailedtopointthemout,andevencoveredthemupinvariouswaysandissuedfalseauditreports.
ThefinethatChineseauthoritieshitPwCisthefirstmajorpenaltyleviedagainstanauditorrelatedtoChina’rythisyear,,PwCprovidedunqualifiedopinionsonEvergrande’,PwCwasoneofthemostfrequently,suchasCountryGardenHoldingsandSunacChinaHoldings,beforethesecompaniesdefaultedontheirdebts.
InresponsetoadministrativepenaltiesannouncedbytwoChineseregulators,PwC’sglobalchairMohamedKandesaidtheauditworkperformedbyPwCZhongTian’sEvergrandeauditteam“fellwellbelowourhighexpectationsandwascompletelyunacceptable.”PwCChinasaidithastakenanumberofaccountabilityandremedialactionstoaddressthismatter,includingtoterminatetheemploymentof6partnersandexited5staffdirectlyinvolvedintheEvergrandeauditwork,andtotakeaccountabilityactionsandcommencedtheprocessofissuingfinancialpenaltiesforcurrentandformerfirmleadershipwhowereresponsibleforthebusiness.
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