The Big Four firm PwC’s Chinese entity is expected to be hit with a six-month business ban over its audit of collapsed Chinese real estate property developer Evergrande.
PwC China has been informing clients that as early as September, it expects China’s securities regulator to enforce its ban, according to the Financial Times.
Back in August 2022, Hong Kong’s audit watchdog launched a probe into PwC over its audit of Evergrande.
At the start of 2023, the Big Four giant resigned as Evergrande’s auditor following a series of disagreements with the heavily-indebted property developer over the audit of its 2021 accounts.
The Chinese property developer giant then went on to file for bankruptcy in the US later that year, in the midst of a debt overhaul.
At the start of 2024, a Hong Kong court ordered the Evergrande Group to liquidate after it was unable to reach a restructuring deal with creditors.
China’s securities regulator accused Evergrande and its founder Hui Ka Yan of inflating its mainland Chinese revenues by almost $80bn over 2019 and 2020, back in March.
The FT reported that PwC Zhong Tian, the entity commonly known as PwC China, will not risk going under, this ban threatens to be highly disruptive to the firm.
As the bank would prevent the firm from signing off financial results and initial public offerings and from conducting other regulated activities, clients told the FT.
The firm has assured clients that staff will keep working during the suspension.
This is a more serious punishment than what rivals Deloitte received last year for a “serious audit deficiencies” in its work for China Huarong Asset Management.
Deloitte paid a 211.9m yuan (£25.3m) fine and its operations in Beijing were suspended for three months.
Statement from PwC China said: “Given this is an ongoing regulatory matter, it would not be appropriate to comment.”