PwC invests in China despite record fine, focuses on remedial measures

PwC in China: Following a record fine and a six-month suspension imposed by Chinese regulators, PwC is taking significant steps to enhance its business operations in China. The Big Four firm announced a series of "tangible investments" aimed at ensuring long-term quality and sustainability within its Chinese operations, as detailed in an internal memo circulated to staff.

Record Fine and Suspension for PwC’s China Unit

PwC Zhong Tian LLP, the firm’s mainland China unit, received a hefty penalty of 441 million yuan ($62 million) on Friday. The fine and suspension are the result of scrutiny over PwC’s audit work for China Evergrande Group, which has been embroiled in a $78 billion fraud scandal. The Chinese securities regulator's investigation, launched in March, scrutinized Evergrande's accounting practices over two years, leading to regulatory actions against PwC.

Leadership Changes and Remedial Actions

In response to the crisis, PwC has appointed Hemione Hudson, the global risk and regulatory leader, as the new head of its China territory. Hudson's appointment is part of the firm's broader remedial strategy. Daniel Li, the former senior partner responsible for the China unit, has stepped down due to his previous role overseeing local auditing operations.

Hudson emphasised the firm’s commitment to addressing the challenges and implementing a detailed remediation plan to restore trust and position the business for future success. She also highlighted the importance of investing in the development of PwC's 18,000 professionals in China.

Continued Investigation into Hong Kong Operations

The regulatory scrutiny does not end with the mainland unit. PwC's Hong Kong office is also under investigation for its role in auditing China Evergrande, which is listed in Hong Kong. The Accounting and Financial Reporting Council of Hong Kong has confirmed that its independent investigation into the matter will proceed in an orderly manner.

Commitment to High-Quality Audits

Despite the recent issues, PwC asserts that the actions of a small number of engagement team members do not reflect the overall quality of its services. The internal memo reinforced the firm's historical commitment to high-quality audits and expressed confidence in its ability to overcome the current challenges with continued support from the global network.

PwC’s efforts to invest in its China operations and address regulatory concerns signal a strong commitment to maintaining high standards and achieving long-term stability in the region.