PwC’s role in approving accounts for troubled property developer Evergrande has led to infighting at the big four firm as clients reconsider their relationship.
Already a subscriber?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.
, and its collapse has sent shockwaves through the economy. Founder Hui Ka Yan faces a lifetime ban from public markets as a result of the March regulatory findings. PwC had audited the company since as early as 2009 before resigning in 2023. 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.The uncertainty has extended to PwC clients beyond SOEs.
Chao is also in charge of PwC’s business in Hong Kong, where regulators are investigating the audit of Evergrande’s Hong Kong-listed parent company. People close to Evergrande’s liquidators have said they are considering legal action against PwC.The big four accounting firms operate as legally separate, locally owned partnerships under a global umbrella that coordinates marketing and oversees quality.that has affected all the big four accounting firms but has been especially difficult for PwC.
“Evergrande will continue to be the biggest challenge for Daniel when he takes over,” said a China-based partner at a rival big four firm who was expecting an opportunity to pick up business from SOEs. “Whether or not PwC can recover from this, it will be in the hands of the authorities.”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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