Evergrande, China sanctions PwC for 62 mln and blocks it for 6 months

The Chinese authorities announced that they had imposed a fine of 441 million yuan (USD 62.2 million) on PwC for its role in the audit of real estate giant Evergrande, which was placed in forced liquidation and accused of fraud.

The China Securities Regulatory Commission (Csrc), in cooperation with the Ministry of Finance, found that the company had not 'exercised due diligence' in its audit and imposed a maximum fine, as well as other sanctions, on PwC. In addition, PwC will have to serve a six-month suspension of its audit activities in Mainland China.

As a result of the investigation, 'it was discovered that PricewaterhouseCoopers and its Guangzhou branch knew that there were major inaccuracies in the financial statements of Evergrande Real Estate during the audit,' the Chinese Ministry of Finance said in a note, adding that it had imposed administrative sanctions that included 'suspending its business for six months and revoking its Guangzhou branch'. In a separate statement, the China Securities Regulatory Commission, the Mandarin Consob, announced that it had sanctioned PwC, while another fine in coordination with the Ministry of Finance brought the total to 441 million yuan (USD 62 million). In detail, PwC was accused of aiding and abetting the Evergrande fraud through conduct that 'seriously eroded the basis of law and good faith, damaging investors' interests'.

For this mitigation, the revenues of the Chinese unit of PwC involved in the Evergrande case totalling 27.7 million yuan were confiscated and a fine of 297 million yuan was imposed. The fines decided were due to the fact that the firm 'failed to perform due diligence' in its audit work on Evergrande: PwC 'failed to maintain due professional scepticism, failed to make correct professional judgements and failed to uncover Evergrande Real Estate's financial fraud, which was far-reaching and of great proportions'.

US firm PwC has admitted that its auditors in China applied "unacceptably sub-standard" standards in overseeing the accounts of troubled real estate group Evergrande, after it was banned from conducting business in the country for six months and fined $62 million. "Following a thorough investigation, we ensured that action was taken towards those responsible," Mohamed Kande, global chairman of PwC, said in a statement posted on PwC's website.