The punishment is the heaviest yet for an international accounting firm operating in China.
The authorities in China have banned the accounting firm PwC for six months and fined it over 400 million yuan (€50.86m).
The decision comes after regulators found PwC staff hid fraudulent practices during the audit of collapsed property developer Evergrande.
After already losing clients due to questions over the audit, PwC will now be banned from signing off on any financial results in the country for six months.
The fine includes a 116 million yuan (€14.73m) penalty from China’s Ministry of Finance and a 325 million yuan (€41.28m) penalty from the China Securities Regulatory Commission.
According to the finance ministry, false conclusions were drawn during audits because of “serious defects” in PwC’s work.
It accused the firm of not maintaining “professional scepticism” and failing to point out errors.
The ministry also criticised the lack of information disclosed by Evergrande during the audits.
The securities regulator, meanwhile, said 88% of the records kept by PwC regarding the real estate projects were inconsistent with the actual implementation and were “seriously unreliable”.
When on-site investigations were carried out, some projects were still “a piece of vacant land” despite being considered to have met the delivery conditions, the regulator said.
Mohamed Kande, global chair of PwC, responded to the decision in a statement.
“The work performed by PwC Zhong Tian’s Hengda audit team fell well below our high expectations and was completely unacceptable,” he noted.
“It is not representative of what we stand for as a network and there is no room for this at PwC,” he said.
Hengda is the principal subsidiary of China Evergrande Group.
Kande’s statement added that the PwC unit had cooperated fully with regulators and would fully comply with the administrative penalties.
PwC China has fired six partners and five staff directly involved in the Hengda audit, and the firm is also in the process of issuing financial penalties for current and former firm leaders responsible for the business.
The audit came under Beijing’s scrutiny after the collapse in January of Evergrande, the world’s most indebted developer and a symbol of China’s ongoing property crisis.
China’s securities regulator said in March that Evergrande had inflated its mainland China revenues by almost $80bn (€72.09bn) in 2019 and 2020.
In May, the authorities fined the company $577m (€519.92m).
PwC had audited Evergrande’s accounts for 14 years until 2023 and gave it a clean bill of health.
PwC has been the largest of the “big four” accounting firms operating in China, taking in nearly 8 billion yuan (€1.02bn) in revenues in 2022, above competitors Deloitte, KPMG and EY, according to the Chinese Institute of Certified Public Accountants.
China has been cracking down on excessive borrowing by developers during a prolonged property market slump that has hit many other parts of the economy, including construction, building materials and home appliances.
