Sept. 13 (UPI) — China’s Securities Regulatory Commission and Ministry of Finance Friday fined accounting giant PwC $62 million and suspended the company for six months for allegedly enabling financial misdeeds by the Evergrande Group real estate developer. China’s Ministry of Finance said in a statement that PwC “knew Evergrande made material misstatements in its financial statements for the years 2018-2020″ as it handed down the nation’s largest-ever fine against an audit firm.
The ministry added that PwC not only failed to point out those misstatements but allegedly falsified its audit report on Evergrande.
PwC reacted to the fine and suspension in a statement.
“We are disappointed by PwC Zhong Tian’s (or “PwC ZT”) audit work of Hengda [Evergrande’s principal subsidiary], which fell unacceptably below the standards we expect of member firms of the PwC network,” PwC’s statement said. “PwC ZT cooperated fully with its regulators, respects their decisions, and will fully comply with the administrative penalties.”
PwC said it has terminated the employment of six partners and five staff directly involved in the audit work.
The company also said it has taken “accountability actions and commenced the process of issuing financial penalties for current and former firm leadership who were responsible for the business.”
PwC defended its audit integrity by blaming the incident on “a very small number of engagement team members is representative of the work of the vast majority of PwC China’s 18,000 professionals.”
Questionable accounting and a lack of proper oversight contributed to Evergrande’s failure, leading to a default in 2021 that reverberated through China’s property development and housing industries.
China’s Securities Regulatory Commission determined that PwC overlooked massive fraud at Evergrande and “violated multiple audit standards and audit requirements.”