PwC Punished by Chinese Authorities for Audit Oversight on Evergrande Group Project
PricewaterhouseCoopers (PwC) has been heavily penalized by the Chinese Communist authorities for negligence in auditing the Evergrande Group project. Today, on September 13th, PwC received a “maximum penalty” notice from the Chinese Ministry of Finance and the China Securities Regulatory Commission, imposing a joint penalty of 441 million yuan (RMB) and suspending its business qualification for six months, along with revoking the PwC Guangzhou branch.
Since January of this year, the Chinese Ministry of Finance organized an inspection team to conduct a special inspection on the practice quality of the audit project of Evergrande Real Estate Group Co., Ltd. carried out by PwC Zhongtian Accountants firm and its Guangzhou branch.
In the afternoon of September 13th, the Chinese Ministry of Finance and the China Securities Regulatory Commission announced the penalty decision against PwC.
The Ministry of Finance stated that for the actions of PwC related to the audit project of Evergrande Real Estate in 2018, an administrative penalty of confiscating illegal gains and a total fine of 116 million yuan were imposed. At the same time, PwC was given a warning, its business was suspended for six months, and the PwC Guangzhou branch was revoked.
Regarding certified public accountants, four signing certified public accountants who issued audit reports for the financial statements of Evergrande Real Estate from 2018 to 2020 – Tang Zhenfeng, Wei Ze, Zhu Liwei, and Cai Xiujuan – had their CPA certificates revoked. Seven other registered accountants involved in preparing the consolidated financial statements of Evergrande Real Estate, including Chen Yuntao, Wu De’en, Pan Guowei, Chen Zhijie, Chen Junyu, Lu Yujie, and Jin Ying, were given warnings or fines.
The China Securities Regulatory Commission stated that an administrative penalty was imposed on PwC for its negligence in auditing the Evergrande Real Estate annual report and bond issuance work. PwC’s entire business income during the period of involvement in the case was confiscated, and a maximum penalty of 277.4 million yuan was imposed, with an additional penalty of 20 million yuan for each of the four instances of unpaid bond issuance audit services, totaling a confiscation of 325 million yuan.
In the exercise of penalty discretion, the China Securities Regulatory Commission confiscated all of PwC’s business income for two years and imposed the maximum penalty in conjunction with the Ministry of Finance, resulting in a total penalty of 441 million yuan.