The Chinese authorities have fined PwC £67m for major failures on the Evergrande audit and senior UK partner sent in to run the firm.
The Chinese Ministry of Finance has suspended PwC China from undertaking any audit work in the country for six months and the firm has been given a ¥297m (£32m) penalty.
At the same time, the China Securities Regulatory Commission has fined PwC China a further ¥325m (£35m) for failing to perform due diligence in the audit of Evergrande, the collapsed real estate developer.
While the fines include penalties for individual partners and audit staff.
PwC China had audited Evergrande for 14 years until 2023, when it resigned the business after facing multiple investigations by Hong Kong and Chinese regulators over their audit work.
In total 11 senior audit staff at the firm have been fired with PwC terminating the employment of six partners and exiting five staff directly involved in the Evergrande audit work.
To help repair its reputation, Hermione Hudson, a senior UK partner and PwC's global risk & regulatory leader, has been appointed to run PwC China.
Hudson replaces Daniel Li but he will remain with the firm in his role as chief accountant. Meantime, the audit and assurance business will be run by Kevin Wang, current head of assurance.
Mohamed Kande, global chair, PwC has said that the work performed by PwC China audit team fell well below expectations and was completely unacceptable.
PwC has started the process of issuing financial penalties for current and former firm leadership who were responsible for the business.
PwC China has 18,000 staff and said that the significant audit failures only affected a limited number of employees.
PwC China is an audit partnership in the Chinese mainland. The sanctions imposed by the regulators apply to PwC China but not to other separate PwC legal entities that provide non-audit services in the Chinese mainland, or any PwC legal entities in Hong Kong SAR.
Ouch!
Peter Nichols
BFN Accounts & Tax Limited