PwC audited the balance sheets of the failed real estate group China Evergrande for many years. According to the Chinese authorities, the auditors knowingly messed up. The result: harsh penalties.
China’s authorities have imposed a six-month business ban and a million-euro fine on the auditor PwC. The reason for this is failures in the audit of the insolvent real estate group China Evergrande, the securities regulator in Beijing announced. In addition, PricewaterhouseCoopers (PwC) must pay a total fine of 441 million yuan (around 56 million euros).
The penalty is considered to be the harshest that Beijing has ever imposed on one of the major international auditing firms. The Chinese stock market regulator stated in March that Evergrande had inflated its own sales by the equivalent of around 75 billion euros in the years before its collapse. According to the Chinese Ministry of Finance, the PwC subsidiary in China knew that the company’s balance sheets contained errors during the years in question, 2018 to 2020. However, it did not object to these.
Employees laid off
The work of the Chinese PwC branch in the audit of the Evergrande Group fell short of the auditing firm’s high expectations and was completely unacceptable, said PwC’s global board member Mohamed Kande, according to the statement. Six partners and five employees who were directly involved in the audit lost their jobs. China remains an important part of the PwC network, explained Kande. He remains confident that he can rebuild trust in China.
The crisis at China Evergrande and in the real estate sector came to light in 2021 when the group was no longer able to service its loans. At the end of January this year, a Hong Kong court ordered the liquidation of the heavily indebted group. Numerous other property developers are also in difficulties. The crisis is weighing on the entire Chinese economy, not least because the sector was once an important economic driver.
Source: Stern
