Home » PwC to bring UK partner for help after Evergrande scandal hurts operations in China: Report

PwC to bring UK partner for help after Evergrande scandal hurts operations in China: Report

PwC to bring UK partner for help after Evergrande scandal hurts operations in China: Report

In a bid to help out PricewaterhouseCoopersChina unit, the audit major is likely to tap senior partner from the United Kingdom to run its business in the East Asian country as fallout from collapsed property developer Evergrande continues to mount, reported The Financial Times quoting its souces. ‘The accounting firm’s global leaders have tapped Hemione Hudson, a runner-up in the race to lead PwC UK earlier this year, to lead the scandal-hit China business,’ reported FT further by quoting its sources.

The troubles also increased for the audit giant after Country Garden Holdings said on Thursday that PwC has agreed to resign as its auditor, as the property developer became the latest Chinese company to sever ties with the firm.

PwC has been in focus over its role in auditing China Evergrande Group which was accused of a $78 billion fraud, triggering a client exodus, cost cuts and layoffs.

Previously, Chinese regulators were expected to impose a six-month business suspension on a big part of PWC’s auditing unit in mainland China, as a penalty for its work on troubled property developer Evergrande, according to Reuters report.


A fine of at least 400 million yuan ($56 million) is expected to accompany the six-month ban, three of the people said. Combined with the business suspension, it would be the toughest ever penalty received by a Big Four accounting firm in China, the three people added.In the most recent case of a Big Four auditor being hit with hefty penalties, Deloitte’s Beijing branch in March last year was fined 211.9 million yuan and the branch’s operations were suspended for three months after serious deficiencies were found in its audit of China Huarong Asset Management.PwC has been under regulatory scrutiny for its role in auditing China Evergrande Group since the developer was accused in March of a $78-billion fraud. PwC audited Evergrande for almost 14 years until early 2023.

As part of the penalties, PwC would be barred from signing off on certain key documents for clients in mainland China such as results and IPO applications as well as from carrying out other securities-related services, the sources said.

The business suspension could also affect PwC Zhong Tian, as a whole, from taking on new state-owned or domestically-listed clients in the next three years, in accordance with Chinese regulations.

Last year, domestic regulators reiterated state-owned firms and mainland China-listed companies should be “extremely cautious” about hiring auditors that have received regulatory fines or other penalties in the past three years.

In the past few months, at least 50 Chinese firms, many of which are state-owned enterprises or financial institutions, have either dropped PwC as their auditor or cancelled plans to hire the firm, according to stock exchange filings reviewed by Reuters.

Its largest mainland China-listed audit client, Bank of China, said on Monday it plans to hire EY for its 2024 annual audit. In June, the bank stated that its service agreement with PwC would only be for the interim report review.

PwC Zhong Tian recorded revenues of 7.92 billion yuan in 2022, making it China’s highest-earning auditor that year, followed by EY, Deloitte and KPMG, official figures show.

(with agency inputs)