PwC Fires Chinese Partners, Pledges to Rebuild Post-Evergrande

PwC China has fired six partners it blamed for shoddy audits of fallen property developer Evergrande and demoted its top leader as its global arm sweeps in to help the beleaguered audit practice rebound.

The firm fired another five staff members who worked on the developer’s audit. The Shanghai-based firm also plans to impose financial penalties on audit leaders, PwC Global said in a statement on Friday following a record regulatory penalty imposed by China.

Chinese authorities said that PricewaterhouseCoopers Zhong Tian LLP, the firm’s Chinese arm, failed to identify financial fraud at Evergrande and concealed accounting misstatements, among other problems with audits of the property developer’s financial reports spanning 2018 to 2020.

Regulators imposed financial sanctions equivalent to the fees PwC China had earned from its Evergrande work plus additional fines for a total of 441 million yuan ($62 million) and suspended the firm for six months. Four auditors lost their public accounting credentials and seven others were sanctioned or fined as a result of the government’s probe into PwC’s audit work.

“Following a thorough investigation, we ensured that actions were taken to hold those responsible to account and a comprehensive remediation programme will build a stronger PwC China firm for the future,” Mohamed Kande, PwC’s global chair, said in a statement.

PwC China demoted Senior Partner Daniel Li, who led its assurance business, to the role of chief accountant. Hemione Hudson, global risk and regulator leader based in the UK, will step in as the firm’s temporary senior partner, PwC Global said.

The Big Four accounting and consulting giant also plans to pull in staff from other affiliates to bolster PwC China’s management controls meant to deliver sound audits. It’s among several steps PwC is taking to fix audit failures uncovered by Chinese regulators.

In addition, the firm’s Chinese arm plans to focus on training, technology, and a redoubled effort “on culture and governance,” PwC Zhong Tian said in a statement.

This isn’t the first time the firm has pulled in leaders from around its global network to step into a crisis and manage a flailing business. PwC brought in a leader from Singapore to run its Sydney-based firm in the wake of a tax scandal in Australia.