China dials up scrutiny of Big Four audit firms after Evergrande probe, sources say
China's Ministry of Finance is conducting more rigorous checks of work done by the Big Four auditing firms for local companies, three people with knowledge of the matter said, amid concerns auditors are not doing enough to uncover corporate wrongdoing.
The tighter scrutiny, which has not been previously reported, is mainly focused on Deloitte, EY, PwC, KPMG and their audits of some financial firms as well as highly leveraged companies, said the people.
It began a couple of months ago and comes in the wake of a regulatory probe into «intermediaries» for property giant China Evergrande Group, which refers to auditors, rating agencies and other providers of financial services.
Evergrande, which defaulted on its debt and has been ordered into liquidation, was found by authorities to have inflated its revenue by $78 billion.
It is only one of scores of property developers to have defaulted on debt — a crisis that has hobbled economic growth and triggered concerns about just how much exposure financial firms have to the sector. Chinese regulators this month pledged a clampdown on financial fraud, seeking to restore confidence in country's struggling stock markets.
The finance ministry makes routine checks of audits done by the Big Four but this year it has demanded far more documents than previously and the number of queries the audit firms have had to field has jumped, the people said.
According to two of the sources, the ministry is particularly interested in audits of small and weak lenders from debt-laden
