Five more clients ditch PwC after fine, suspension

PricewaterhouseCoopers lost five fund clients in a day, mainland media outlet The Paper reported, after Chinese regulators hit its mainland unit with a six-month suspension and a record fine over the firm's audit of failed property developer China Evergrande (3333).

The accounting firm was fined 441 million yuan (HK$485 million) for its auditing work on Evergrande's inflated financial reports from 2018 to 2020, statements by the Ministry of Finance and the China Securities Regulatory Commission showed Friday. The regulator also ordered the closure of PwC's branch in Guangzhou.

The Paper reported that five fund firms including HuaAn Funds have parted ways with PwC on Saturday.

"Such a severe penalty will have a major impact on the confidence of PwC's remaining domestic clients," said Pingyang Gao, an accounting and law professor at HKU Business School. "It is very likely that there will be a mass exodus. So it will likely spell doom for PwC's business in China."

Meanwhile, Hong Kong's Accounting and Financial Reporting Council said its investigation into PwC's audits of Evergrande in the city remains in progress.

PwC has been under the spotlight after China launched one of the biggest investigations of financial fraud in history. Authorities said Evergrande's main unit Hengda overstated its revenue by 564 billion yuan in the two years through 2020.

Staff reporter and agencies