PwC Scandal Sparks Client Defections Amid Evergrande Accusations
In recent news, auditing firm PricewaterhouseCoopers (PwC) is facing a wave of client defections in Hong Kong and mainland China following accusations tied to insolvent property developer China Evergrande. China Merchants Port Group, a Shenzhen-listed conglomerate, is among the latest corporations to terminate contracts with PwC, citing concerns around possible malpractice. Other major companies such as China Merchants Bank, China Railway Group, Mindray Bio-Medical Electronics, and Eastroc Super Drink have also either scrapped plans to hire or ended contracts with the auditing firm.
The troubles for PwC escalated after whistle-blowers alleged that the firm’s mainland China and Hong Kong branches had ignored misconduct by China Evergrande for over a decade. This led to regulatory scrutiny in both regions, with investigations into PwC’s practices linked to Evergrande. In response, some companies have already switched to other audit firms like EY and Deloitte.
China Evergrande, known as the world’s most indebted developer, faced accusations of inflating its sales and profits leading up to its liquidation in 2021. The China Securities Regulatory Commission imposed a hefty fine on Evergrande’s founder and barred him from the country’s financial markets. The scandal has also affected the operations of US-linked auditors in China, as Beijing tightened regulations on cross-border auditing work.
PwC’s recent troubles in various regions, including Australia and mainland China, have raised concerns about its auditing practices and compliance with regulations. The company’s affiliates were fined for auditing failures related to US-listed Chinese companies, highlighting the need for stricter oversight in the industry. The repercussions of the PwC scandal are likely to have a lasting impact on the audit sector and client relationships.