PwC’s Chinese auditing arm has been suspended from the country for six months over its work on the collapsed Chinese property giant Evergrande.
The Big Four accountancy firm is also being fined more than $62m (£47m) after Chinese authorities said it had helped cover up fraud at Evergrande.
The real estate firm collapsed in January under a mountain of debt.
PwC China admitted the work had fallen “unacceptably below the standards” expected within the firm and apologised for the impact on its clients.
The Chinese authorities said PwC knew there were “major misstatements” in Evergrande’s financial statements when it audited the firm.
As a result, the Chinese Ministry of Finance has imposed “administrative penalties” and suspended the operations of PwC’s auditing business PwC ZhongTian for six months.
Other PwC operations providing non-audit services in China are not affected.
In addition, China’s securities regulator has confiscated the revenue PwC earned auditing Evergrande and has also issued a fine.
An investigation by the regulator said PwC had “seriously eroded the basis of law and good faith, and damaged investors’ interest”.
In response to the penalties, PwC said it had taken “a number of accountability and remedial actions”, including the sacking of six partners and the launch of a process to fine responsible team leaders.
An additional five staff have also left, and Hemione Hudson, PwC’s global risk and regulatory leader, has been parachuted in to run the Chinese unit on an interim basis.
PwC admitted the work done on the Evergrande audit had been “well below” standards expected at the firm.
“It is not representative of what we stand for as a network and there is no room for this at PwC,” the firm’s global chair Mohamed Kande said.
“That is why, following a thorough investigation, we ensured that actions were taken to hold those responsible to account.
“I remain confident in the China firm’s partners and staff as we work together to rebuild trust with stakeholders,” he added.
PwC China said in a statement: “We deeply regret and apologise for the impact this has had on our clients and people. We will work tirelessly to regain their trust.”
Evergrande, which built property in more than 280 Chinese cities and branched out into other business sectors, teetered, then finally went into liquidation in January.
The Chinese authorities have accused Evergrande and its founder, Hui Ka Yan, of falsely inflating revenues at the firm to the tune of $78bn (£61.6bn) and imposed fines and bans on him personally as well as the business.