PwC, the auditing firm for bankrupt Chinese property developer Evergrande, may soon be banned in China.
The Financial Times reported that the Chinese branches of the “Big Four” accounting firms have told clients they expect authorities to impose six-month bans as early as next month.
In addition to the ban, Beijing is reportedly considering imposing huge fines on PwC that could reach 1 billion yuan ($140 million), Bloomberg reported in May, which would be the largest fine ever levied against a Chinese audit firm.
Regulators are scrutinizing PwC’s role in auditing China Evergrande Group, the embattled property developer that has become a symbol of China’s real estate crisis. In March, authorities accused Evergrande of inflating its revenue by about $80 billion in 2019 and 2020.
Evergrande defaulted on its debt in 2021, triggering China’s ongoing real estate crisis that continues to drag down the economy. A Hong Kong court ordered Evergrande into liquidation earlier this year. Evergrande’s liquidators have reportedly filed a lawsuit against accounting firm PwC China for “negligence.”
According to the Financial Times, the ban will prevent PwC from preparing financial statements, approving initial public offerings or carrying out other regulated activities.
A PwC China spokesman said it was not appropriate to comment on ongoing regulatory matters.
Clients are already moving away from PwC China, which was China’s largest audit firm until March this year. State-owned Bank of China said in a filing late on Monday it was switching to EY as its auditor.
The loss of clients has reportedly led to job cuts and salary cuts at PwC’s China division.
PwC’s China troubles are just the latest crisis for the global auditing firm. Last October, the CEO of PwC’s Australian branch apologized to the Australian government for leaking secret government tax plans to U.S. clients. PwC’s Australian arm cut more than 600 jobs and sold its government consulting business for A$1 ($0.67) in the wake of the tax leak scandal.
Then in December, U.S. regulators found that more than 1,000 China-based staff at accounting firm PwC had cheated on an in-house training exam on U.S. auditing practices, and fined the firm $7 million.
