China to slap PwC with record-breaking fine, sources say
China to slap PwC with record-breaking fine, sources say | Insurance Business Asia
Insurance News
China to slap PwC with record-breaking fine, sources say
Penalty concerns company’s audit work for developer caught up in financial fraud scandal
Insurance News
By
Roxanne Libatique
China is set to impose a record fine of up to 1 billion yuan (HK$1.08 billion) on PricewaterhouseCoopers (PwC) and suspend some of its operations within the country.
According to The Standard, sources familiar with the matter said this action is linked to the firm’s role in one of China’s major alleged financial fraud cases.
Penalties concerning PwC in China
The Ministry of Finance could announce these penalties concerning PwC’s auditing work for developer China Evergrande Group (Evergrande), sources told The Standard.
In addition to the financial penalty, the sanctions may include suspending operations at several PwC offices in mainland China, the sources said.
PwC under scrutiny following fraud investigation
PwC has been under increased scrutiny following a major financial fraud investigation involving Evergrande.
Earlier this year, authorities fined Evergrande 4.18 billion yuan and reported that its main unit, Hengda, had overstated its revenue by 564 billion yuan for the years 2019 and 2020.
“The penalty will damage PwC’s reputation and adversely affect public confidence in accounting,” said Gao Pingyang, a professor at Hong Kong University Business School, as reported by The Standard. “I wouldn’t be surprised if the share of the auditing market by those global franchises in China would shrink.”
In May, PwC lost several Chinese clients, adding to over a dozen firms it has stopped auditing in the past two years. These include China Taiping Insurance Holdings, China Merchants Bank, and the People’s Insurance Company (Group) of China.
PwC denies allegations
In April, PwC refuted allegations made in an anonymous letter circulated on social media, accusing the firm and its partners of misconduct in their audit of Evergrande.
The anonymous letter questioned PwC’s role in potential accounting discrepancies at Evergrande and other corporate governance issues. Bloomberg reported that it could not verify the authenticity of the letter.
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