China Imposes Record $62.2M Fine and Six-Month Ban on PwC for Evergrande Audit Failures: A Move to Reinforce Financial Regulations and Market Integrity

PwC faces an unprecedented penalty of US$62.2 million and a six-month suspension in China due to audit shortcomings with Evergrande. Beijing aims to deliver a powerful warning to auditors regarding their duty as watchdogs, according to Edmund Wong, a legislator from Hong Kong.

The fine, the most severe ever levied on an auditing company in China, is a part of Beijing's initiative to strengthen financial rules and enhance the trustworthiness of the market, according to analysts.

The Ministry of Finance claimed on its website on Friday that the PwC division was unsuccessful in identifying the actual financial status and incorrect bookkeeping of Evergrande between the years 2018 and 2020.

"PwC Zhong Tian along with its Guangzhou branch didn't spot the incorrect accounting procedures on the financial reports of China Evergrande Group between 2018 and 2020, due to their failure to provide a suitable audit opinion highlighting these discrepancies," according to the statement.

The China Securities Regulatory Commission (CSRC) has stated that its inquiry has revealed that PWC Zhong Tian assisted Evergrande in concealing its fraudulent activities and was unsuccessful in conducting an effective onsite audit. According to the regulator's statement, the company did not identify that some properties, which Evergrande claimed were completed, were actually still vacant land.