PwC invests in ‘high quality’ business in China after record fine, internal memo says By Reuters

Written by Shi Yu

HONG KONG (Reuters) – PwC said it is making “concrete investments” to ensure the Big Four firms have high-quality and sustainable business in China, after Chinese regulators on Friday imposed a record penalty on the firm’s mainland unit.

PwC Zhong Tian LLP was suspended for six months and fined 441 million yuan ($62 million) on Friday over the firm’s audit of a failed property developer in China. Evergrande (Hong Kong:) Group.

Chinese authorities have been examining PwC’s role in Evergrande’s accounting practices since the country’s securities regulator in March accused the developer of defrauding the company of $78 billion over two years through 2020.

“We want to acknowledge that this has been a very difficult period for all of you,” said the internal memo issued by PwC late Friday after the regulatory penalty was announced, and seen by Reuters.

“The PwC network has also shown continued support for our business in China throughout this period… They are making tangible investments to ensure we have long-term, high-quality and sustainable business in China,” the company added.

PwC did not immediately respond to a Reuters inquiry on Monday.

“I know the coming weeks will not be easy as we develop a detailed recovery plan and begin to position the business for future success,” Hemione Hudson, president of the company’s New China region, said in the memo.

PricewaterhouseCoopers has appointed global risk and regulatory leader Hudson to replace China senior partner Daniel Lee as part of its remedial actions. Lee has stepped down due to his “previous responsibilities” as head of local audit.

The company said its leadership team will help employees “answer any questions or concerns” they may have regarding the Chinese regulatory announcements.

“I will focus on spending time with you and looking at ways to further develop our talent, including investing in you as our people,” Hudson said in the memo.

The note added that PwC China has a long history of high-quality audits.

“We do not believe that the behaviour of a very small number of engagement team members represents the work of the vast majority of the 18,000 professionals at PwC China,” the company said.

Separately, regulators are continuing their investigation into PwC’s work by its Hong Kong unit in relation to China Evergrande, a Hong Kong-listed entity, according to regulatory filings from the mainland and Hong Kong on Friday.

The penalty announced by mainland regulators “set an important milestone in cross-border law enforcement for China Evergrande,” Hong Kong’s Accounting and Financial Reporting Council said in a statement on Friday.

“Our independent investigation into the China Evergrande case will be conducted in an orderly manner,” the company said in a statement.