The China branch of PwC, a renowned "Big Four" firm, has been fined $7 million by a US regulator. The firm was found to have neglected to uncover or stop widespread cheating by its employees during internal training exams in mainland China and Hong Kong, according to the US Public Company Accounting Oversight Board (PCAOB). This fine is among the highest ever imposed by the board.
The PCAOB announced that the widespread practice involved over 1,000 employees from PwC Hong Kong and hundreds more from PwC China. These penalties mark the first enforcement by the US agency against Chinese companies since a 2022 agreement that granted US regulators the authority to inspect and investigate firms in mainland China and Hong Kong that audit the books of Chinese companies listed on Wall Street.
Between 2018 and 2020, employees at PwC participated in unauthorized answer sharing by sharing or accessing answers through two unauthorized software applications for online tests related to mandatory internal training courses for the firm's US auditing curriculum. The independent watchdog led by Congress revealed the majority of staff involved worked in the firm's assurance practices, which provide advice to clients on corporate disclosures, resulting in a significant breach of quality control standards, as stated by the PCAOB.
PwC was fined a total of $7 million, with its entities in Hong Kong and mainland China being ordered to pay $4 million and $3 million, respectively. According to PCAOB Chair Erica Y. Williams, the $4 million fine is the second-highest penalty amount in PCAOB history, while the $3 million fine matches the third-highest amount.
People walk by the New York Stock Exchange (NYSE) on August 26, 2022 in New York City.
Spencer Platt/Getty Images
China still needs Wall Street. A rare agreement with the US is proof
"There is no longer any room for China-based companies to avoid responsibility," she stated. "The PCAOB will intervene to safeguard US market investors and enforce strict penalties against those who defy PCAOB regulations, regardless of their location."
PwC has been present in China since 1906 and proudly claims to be the largest international accounting firm in the country. With offices in mainland China, Hong Kong, and Macao, the firm has a combined staff of over 20,000.
Williams stated on Thursday that the two PwC cases were directly linked to the information uncovered during last year's inspections. PwC's Hong Kong and mainland Chinese offices issued matching statements on Friday, indicating that they promptly investigated the cheating allegations and implemented corrective measures.
Both companies stated that they have prohibited the continued use or distribution of the technologies in question, and have also arranged for the affected courses to be retaken if necessary. They added that they have "self-reported" the issue to the PCAOB and have worked with US authorities.
PwC Hong Kong and China stated that they take action to learn from their mistakes and strive to improve in the future when they do not meet their high standards. Additionally, on Thursday, the US regulator imposed penalties on a mainland Chinese accounting firm for various violations, including the issuance of a false audit report.
Shandong Haoxin company and four of its partners were found to have improperly presented the work of another accounting firm as their own, as stated by the PCAOB.
As a result, the agency has imposed a total fine of $940,000 on Shandong Haoxin and its four associates, and has prohibited the individuals from associating with a registered public accounting firm for a certain period of time. Shandong Haoxin has not yet responded to a request for comment.
