This article is from the Australian Property Journal archive
MAJOR financial services firm PwC has been banned from China temporarily and fined $92 million for its involvement in the audit of fallen property development giant Evergrande.
PwC had lost more than 50 key clients since liquidators of fallen giant Evergrande sued it amid accusations of “negligence” and “misrepresentation” in its work for the group. Rival developer Country Garden was among those in the exodus.
Following investigations, the Ministry of Finance and the China Securities Regulatory Commission handed down the penalty for firm’s inflating of figures in Evergrande’s financial reports from 2018 to 2020.
The Ministry of Finance imposed a 116 million yuan in fines and confiscation of illegal gains on PwC Zhong Tian, also known as PwC China, and the six-month operating suspension, revocation of PwC’s Guangzhou branch and an administrative warning.
Separately, the China Securities Regulatory Commission slapped PwC with a 325 million yuan fine for the firm’s alleged failure to perform due diligence in the audit of Evergrande.
According to the securities regulator, 88% the records kept by PwC for Evergrande projects were inconsistent with the reality on the ground and “seriously unreliable.” In some cases, residential projects that PwC recorded as completed were still “vacant ground” when inspectors visited the sites.
“The work performed by PwC Zhong Tian’s Hengda audit team fell well below our high expectations and was completely unacceptable,” said PwC’s global chair Mohamed Kande in a statement.
Daniel Li will resign as PwC’s senior partner for China, but remain as chief accountant of the local unit.
Meanwhile, Hong Kong’s Accounting and Financial Reporting Council said its investigation into PwC’s audits of Evergrande in the city remains in progress.
PwC had given Evergrande finances all-clear for more than 10 years before the developer collapsed. Evergrande was ordered into liquidation by a Hong Kong court in January with an unprecedented crushing debt of US$300 billion that gave it the title of “world’s most indebted property developer”.
Evergrande ran into serious issues in the wake of Beijing’s crackdown on loose lending practices to developers, and its defaulting on international debts in 2021 precipitated troubles throughout the country’s property sector and, ultimately, broader economy.
