China halted some of PricewaterhouseCoopers LLP’s business for six months for its role in auditing China Evergrande Group.
The company was fined a total of 441 million yuan ($62 million), according to statements by the Ministry of Finance and the China Securities Regulatory Commission.
PwC has been under the spotlight after China launched one of the biggest investigations of financial fraud in history. Authorities said developer Evergrande’s main onshore unit Hengda overstated its revenue by 564 billion yuan in the two years through 2020.
Earlier this month, PricewaterhouseCoopers resigned as auditor for defaulted developer Country Garden Holdings Co., as both firms navigate challenges to keep operations afloat in China.
The real estate company said PwC is unable to fulfill the timetable requirements for the company’s need to publish its overdue financial statements for 2023. PwC will be replaced by Hong Kong-based Zhonghui Anda CPA, according to a filing.
Country Garden meanwhile is fending off a liquidation petition in a Hong Kong court. The company has delayed announcing its first-half and 2023 full-year results because it needs more time to collect information, it said in an exchange filing in late August. The company is seeking a holistic restructuring of both its dollar and yuan debt.
PwC said in its resignation letter that it was waiting for Country Garden to provide outstanding documents, including the cash flow forecast, in order to assess the developer’s liquidity position.
Resignation often happens when an auditor and its client have significant expectation gaps, said Pingyang Gao, an accounting and law professor at HKU Business School.
Among the Big Four accounting firms, PwC was one of the most commonly used by Chinese real estate firms listed in Hong Kong, according to data compiled by Bloomberg. More than 30 publicly listed firms based in mainland China, including state-owned giants Bank of China Ltd. and PetroChina Co., have dropped PwC as their auditor this year.
