PwC, the auditor of the insolvent Chinese real estate developer Evergrande, is soon facing a ban in China.
The Chinese subsidiary of the Big 4 accounting firm has informed its clients that it expects a six-month business ban from the authorities as early as next month. The Financial Times Reports.
Beijing is reportedly considering imposing a hefty effective on PwC along with the business ban. The effective could possibly be as high as 1 billion yuan ($140 million). Bloomberg This is the biggest effective imposed on an accounting firm in China.
Regulators are probing PwC over its role in auditing China Evergrande Group, the troubled property developer that has turn into the poster child of China’s real estate crisis. In March, authorities accused Evergrande of inflating its revenue by nearly $80 billion in 2019 and 2020.
Evergrande failed to satisfy its payment obligations in 2021, contributing to the continued real estate crisis in China, which continues to weigh on the economy. A court in Hong Kong ordered the liquidation of Evergrande earlier this yr. Evergrande’s liquidators have According to reports initiated legal motion against PwC China, accusing the auditor of “negligence.”
According to the Financial Times, A ban would prevent PwC from approving financial results, IPOs and conducting other regulated activities.
A spokesman for PwC China said it was not appropriate to comment on an ongoing regulatory matter.
Clients are already turning away from PwC China, which was China’s leading accounting firm as recently as March this yr. In a document published on Monday, the state-owned Bank of China said it might Change auditor at EY.
The lack of clients has reportedly led to job cuts and salary cuts at PwC’s China office.
PwC’s problems in China are only the most recent crisis for the worldwide accounting firm. Last October, the CEO of PwC’s Australian office apologized to the Australian government for leaking confidential government tax plans to US clients. The Australian office of PwC cut around 600 jobs after the tax scandal and sale of the federal government consulting business for 1 Australian dollar ($0.67)
In December, a U.S. regulator fined PwC $7 million after finding that greater than 1,000 of the accounting firm’s China-based employees had cheated on internal training exams related to U.S. auditing practices.
