A US regulator has hit the China arm of prestigious “Big Four” firm PwC with a $7 million fine.
The company failed to detect or prevent extensive cheating by its staff during internal training exams in mainland China and Hong Kong, the US Public Company Accounting Oversight Board (PCAOB) said Thursday, leading to one of the highest fines it has ever imposed.
In its announcement, the PCAOB said the practice was widespread, involving more than 1,000 employees from PwC Hong Kong, and hundreds more from PwC China.
The penalties are the first the US agency has enforced against Chinese companies since a 2022 agreement that allowed US regulators to inspect and investigate firms in mainland China and Hong Kong that audit the books of Chinese companies listed on Wall Street.
From 2018 to 2020, PwC workers “engaged in improper answer sharing — by either providing or receiving access to answers through two unauthorized software applications — in connection with online tests for mandatory internal training courses related to the firms’ US auditing curriculum,” according to the Congress-led watchdog.
The “overwhelming majority” of those staff ended up working for the firms’ assurance practices, which advise clients on how to make corporate disclosures, resulting in a gross violation of quality control standards, the PCAOB added.
It fined PwC $7 million in total, with its entities in Hong Kong and mainland China ordered to pay $4 million and $3 million, respectively.
The $4 million is “the second-highest penalty amount for any firm in PCAOB history, and $3 million matches the third highest amount,” PCAOB Chair Erica Y. Williams told reporters Thursday.
“The days of China-based firms evading accountability are over,” she added. “The PCAOB will take action to protect investors on US markets and impose tough sanctions against anyone who violates PCAOB rules and standards, no matter where they are located.”
PwC has operated in China since 1906 and it bills itself as the country’s largest international accounting firm. The mainland Chinese arm works in collaboration with its Hong Kong and Macao offices, collectively boasting a headcount of more than 20,000.
Williams said Thursday that the two PwC cases were “a direct result of information learned in the inspections we conducted last year.”
PwC’s Hong Kong and mainland Chinese offices responded in identical statements on Friday, saying that after they learned of the cheating, they “investigated these matters promptly and took remedial action.”
“This included blocking any further use of or dissemination of the technologies concerned, and directing the retake of courses where applicable,” both firms said.
They said they had “self-reported” the matter to the PCAOB and cooperated with US officials.
“When we do not fully meet the high standards we set for ourselves we take action to learn lessons and commit to do better in the future,” PwC Hong Kong and China said.
On Thursday, the US regulator also penalized a mainland Chinese accounting firm for violations, including issuing a false audit report.
The company, Shandong Haoxin, and four of its associates also improperly passed off “the work of another accounting firm as their own,” according to the PCAOB.
The agency has fined Shandong Haoxin and its four associates a total of $940,000, while barring the individuals from associating with a registered public accounting firm for some time.
In a statement, Shandong Haoxin told CNN that “as the first Chinese accounting firm being investigated, we have fully cooperated with investigations to the full extent we were allowed under Chinese regulations.”
The firm will seek to adhere to both US and Chinese regulations as it continues to provide auditing services for Chinese companies going public in the United States, it added.
