PricewaterhouseCoopers (PwC) is reportedly facing a potential six-month ban on conducting business in China due to its significant involvement in the Evergrande financial scandal, which involves inflated income figures and is regarded as the largest financial fraud case in the country. According to reports from the Financial Times (FT), clients of PwC have been informed that the accounting firm will likely face this business ban, which could commence as early as September.

In March, the China Securities Regulatory Commission revealed that Evergrande had inflated its reported revenues by 564.1 billion yuan during 2019 and 2020, prior to its financial collapse. Despite these findings, PwC’s China office has not formally contested Evergrande's financial statements. The FT further indicates that PwC may be subjected to substantial fines in addition to the proposed ban. There is a possibility that China’s Ministry of Finance could announce an administrative penalty against PwC within the week. Reports suggest that the firm may face a fine of at least 1 billion yuan (approximately $138 million), which would significantly surpass the 212 million yuan fine imposed on Deloitte in 2023, marking it as a record penalty for an accounting firm in China.

PwC Zhongtian (Special General Partnership), operating out of Shanghai and part of PwC’s global network, served as Evergrande’s auditor for the years 2019 and 2020. PwC has maintained its auditing role for Evergrande for over a decade until it resigned in January 2023 due to what the company characterized as audit-related disagreements.

As of 2022, PwC Zhongtian, which employs over 1,600 certified public accountants, achieved business revenues of 7.9 billion yuan, securing its position as the leading auditing firm among more than 9,000 local competitors. In contrast, PwC’s global revenues reached an impressive $50.3 billion during the same year.

Among the "Big Four" accounting firms, PwC is frequently utilized by Hong Kong-listed Chinese real estate companies, including Beygui Yuan and Sunac China, both of which have since defaulted on their debts. Following PwC's involvement in the Evergrande scandal, several listed companies have announced their decision to switch to other audit firms, including China Taiping Insurance and China People's Insurance Co. The Bank of China disclosed on August 19 that it would be replacing PwC with Ernst & Young, with PwC scheduled to audit only the 2024 interim financial report, for which the publication date has been accelerated to August 29.

In response to the looming ban, PwC has assured its clients that its staff will continue to function during the ban period and intends to submit its 2024 annual report before the ban concludes in March next year. However, it remains prohibited from signing off on financial statements, IPO prospectus documents, or engaging in any regulated activities throughout the duration of the ban.

The crisis surrounding Evergrande and the broader real estate sector has profoundly impacted China’s economy, culminating in a Hong Kong court ordering Evergrande to wind down at the end of January, amidst severe financial distress faced by numerous other real estate firms.

Last year, another prominent accounting firm, Deloitte, was sanctioned with a 212 million yuan fine for “serious audit deficiencies” linked to Huarong, in addition to a three-month closure of its Beijing office. PwC is currently dealing with tumultuous circumstances across several regions, as the Hong Kong Accounting and Financial Reporting Council (AFRC) initiated an investigation in April into PwC’s auditing practices concerning Evergrande's accounts. Furthermore, reports have surfaced indicating that PwC Australia is facing layoffs in light of scandals regarding leaks of tax information, while the firm’s UK division faced a fine of £5.6 million last year for its handling of Babcock International Group Plc's accounts.