For years, the global auditing and consulting firm PriceWaterhouseCoopers was a dominant player in China, helping the country’s biggest companies reap big gains — enriching itself along the way.
Now, it has become ensnared in a sweeping crackdown by Beijing that imperils the future of its business in China.
The authorities on Friday suspended PwC’s operations in China for six months and fined it $62 million for its role in the sprawling financial misdeeds committed by China Evergrande Group, once China’s leading real estate developer.
The fine, issued by the Ministry of Finance and the China Securities Regulatory Commission, is the largest levied by the office. It is also the maximum amount that the Chinese regulator can fine an auditor.
PwC “knew that Evergrande Real Estate made material misstatements in its financial statements for the years from 2018 to 2020,” the finance ministry said in a statement, adding that the auditor also “failed to point them out, issuing an inappropriate audit opinion and a falsified audit report.”
In a statement, Mohamed Kande, the global chair of PwC, said in a statement that the work of its auditors in China was “completely unacceptable.” The company said it had cooperated with Chinese regulators and would comply with the penalties they imposed.
The firm fired six partners, along with other staff members, involved in the Evergrande audit work. “It is not representative of what we stand for as a network and there is no room for this at PwC,” Mr. Kande said.
PwC, one of the so-called Big Four accounting firms, has drawn attention this year as Xi Jinping, China’s leader, has called for financial oversight that has “teeth.”
In March, Chinese regulators fined Evergrande’s founder, Hui Ka Yan, $6.5 million and barred him from domestic financial markets for exaggerating Evergrande’s revenue by more than $78 billion. He was also accused of committing securities fraud for two years before the collapse of the company.
The New York Times reported last year that questionable accounting and poor oversight led to Evergrande’s end. It had been treating money it received for apartments as revenue, even when it had not built those apartments, the Times report found.
Evergrande’s default in 2021 set off a chain of collapses of Chinese property developers and triggered a housing crisis that authorities are still trying to resolve. The developer came to symbolize the excesses of China’s property boom, and its downfall exposed how it had enriched an entire ecosystem — including global auditors, local governments, foreign investors and, for some time, a nation of home buyers.
But now the housing crash has left the nation reeling and officials scrambling to plug a gaping financial hole.
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