Firm braces itself for one of the largest fines ever imposed on a Big Four accountancy in China following the collapse of the developer
PwC is facing a crisis in China as partners brace for penalties over its audit of collapsed property developer Evergrande and some clients reconsider their relationship with the accounting firm.
The situation is “high stakes” for PwC China partners, said Francine McKenna, accounting lecturer at the University of Miami Herbert Business School. “The Chinese firms of the Big Four are also part of global networks, and many multinational firms operating in China count on them for audit, tax and advisory services.”
A director at a mainland-listed state-owned enterprise said its board in recent weeks discussed dropping PwC as its auditor if Beijing imposed heavy penalties. Last Friday, state-owned insurance group PICC said it had axed PwC as auditor after just three years, hiring EY instead. PwC has the largest market share in China among the Big Four accounting firms, according to the finance ministry, with revenues of Rmb7.9 billion in 2022. It has almost 800 partners and more than 20,000 staff in mainland China.
The fallout from the Evergrande audit threatens to compound a wider slowdown in the Chinese market that has affected all the Big Four accounting firms but has been especially difficult for PwC. At the beginning of this decade, it counted many of the largest developers among its audit clients, including Country Garden, Shimao and Sunac, and it has since resigned from many of the engagements.
In April, PwC reported to Chinese authorities an open letter circulating on social media purportedly written by a group of PwC China partners that attacked Chao’s leadership and his handling of Evergrande.
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