PricewaterhouseCoopers (PwC) is undergoing significant changes in leadership and strategy in response to regulatory scrutiny and penalties related to its role as the auditor for China Evergrande Group. On September 16, 2024, PwC Zhong Tian was fined 441 million yuan (approximately US$62 million) and received a six-month suspension due to audit failures linked to Evergrande, which was accused of inflating its revenue by about $78 billion over two years. This investigation by Chinese regulators has been ongoing since March 2024, highlighting serious concerns about the firm's auditing practices. [3b53d231]
In light of these challenges, PwC is making tangible investments to ensure a sustainable business model in China. The firm has appointed Hemione Hudson as the new head of PwC China, replacing Daniel Li, who had taken over earlier in July 2023. Hudson's leadership comes at a critical time as the firm seeks to rebuild its reputation and restore client confidence after the fallout from the Evergrande scandal. PwC emphasizes that the actions of a few individuals do not reflect the work of its 18,000 professionals across the country. [3b53d231]
The Evergrande crisis has had far-reaching implications, including the High Court in Hong Kong ordering the company's liquidation in January 2024 after it defaulted on $20 billion in bonds. PwC Zhong Tian had served as Evergrande's auditor for over a decade before resigning in January 2023 and is now facing lawsuits in Hong Kong for negligence and misrepresentation. Additionally, Bank of China has replaced PwC with EY as its auditor, further illustrating the impact of the scandal on PwC's client relationships. [1c5306e1]
In a related development, international law firm Withers has welcomed Laurence Ho, a US-qualified tax expert, back to its Hong Kong office, enhancing its capabilities in international tax and estate planning. This move comes as firms in the region adapt to the changing regulatory landscape and seek to strengthen their practices amid ongoing scrutiny. [01a9986c]