PwC Network Statement Regarding PwC Zhong Tian LLP Administrative Penalties Announced by the Ministry of Finance of the People’s Republic of China and the China Securities Regulatory Commission over the Audits of Hengda, principal subsidiary of the Evergrande Group
We are disappointed by PwC Zhong Tian’s (or “PwC ZT”) audit work of Hengda, which fell unacceptably below the standards we expect of member firms of the PwC network.
PwC ZT cooperated fully with its regulators, respects their decisions, and will fully comply with the administrative penalties.
PwC China and its Governance Board, with support from the PwC network, have taken a number of accountability and remedial actions to address this matter. They:
Terminated the employment of 6 partners and exited 5 staff directly involved in the Hengda audit work.
Have taken accountability actions and commenced the process of issuing financial penalties for current and former firm leadership who were responsible for the business.
In addition:
Daniel Li agreed to step down as PwC China’s Territory Senior Partner (TSP) given his former responsibilities as PwC China’s Head of Assurance. He will continue to support the business in his role as Chief Accountant of PwC Zhong Tian.
Hemione Hudson, PwC’s Global Risk & Regulatory Leader, has been appointed to serve as the interim TSP and will relocate once the steps required to effect her transfer to PwC China have been completed.
Kevin Wang, Head of Assurance, will have an elevated role leading the audit and assurance business for PwC China.
PwC China’s management board will leverage PwC network experts with experience delivering enhancements in quality management and remediation activities. These leaders will have as their highest priority demonstrating PwC’s commitment to trust and integrity in the capital markets.
PwC China has a long history of high quality audits and we do not believe that the behaviour of a very small number of engagement team members is representative of the work of the vast majority of PwC China’s 18,000 professionals. We recognise, however, that we need to take actions that continuously reinforce our values and expectations throughout the PwC network. This is a priority for all PwC leaders.
Commenting on the matter Mohamed Kande, Global Chair, PwC said:
“The work performed by PwC Zhong Tian’s Hengda audit team fell well below our high expectations and was completely unacceptable. It is not representative of what we stand for as a network and there is no room for this at PwC. That is why, following a thorough investigation, we ensured that actions were taken to hold those responsible to account and a comprehensive remediation programme will build a stronger PwC China firm for the future. China remains an important part of the PwC network and I remain confident in the China firm’s partners and staff as we work together to rebuild trust with stakeholders.”
Notes to Editors
Hengda is the principal subsidiary of China Evergrande Group, a listed company in Hong Kong.
PwC China is a construct referring to the collaboration of PwC network entities in the Chinese mainland, Hong Kong SAR and Macau SAR.
- PwC Zhong Tian is an audit partnership in the Chinese mainland and was the auditor of Hengda. The sanctions imposed by the regulators apply to PwC Zhong Tian but not to other separate PwC legal entities that provide non-audit services in the Chinese mainland, or any PwC legal entities in Hong Kong SAR.
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