Hong Kong — PwC, one of the world’s largest accounting firms, is paying HK$1.3 billion ($166 million) in fines and compensation for its audit work in Hong Kong. fail Chinese property developer Evergrande, which was said to have overstated revenues.
Hong Kong’s accounting regulator on Thursday also announced a six-month ban on PwC from working for new clients and said it had issued public reprimands to two of its former partners for misconduct, and fined each of them separately HK$5 million.
China Evergrande, one of China’s largest property developers and once considered “too big to fail”. mistake in 2021 and became the world’s most indebted developer with liabilities of approximately $300 billion. Its rapid collapse was the most prominent case of failure in China’s property sector, which was embroiled in a liquidity crisis after authorities clamped down on excessive borrowing in the industry as many other developers also defaulted or restructured.
The recession in the property sector still continues in China I haven’t fully recovered yetThat has hit home prices across the country and hit consumption and investment sentiment, hurting China’s macroeconomic growth.
PwC was fined in 2024 by mainland Chinese authorities 441 million yuan ($62 million) from the Evergrande audit. Chinese authorities also imposed a six-month ban on the accounting firm over “incorrect” findings in Evergrande’s audit report and “serious flaws” in its auditing procedures.
Hong Kong’s Securities and Futures Commission said on Thursday it had investigated PwC’s work related to Evergrande’s financial statements for 2019 and 2020 and found that its annual revenues and profits were “significantly overstated”.
It said Evergrande had manipulated annual revenues and profits by “prematurely recognizing revenue from asset sales before the completion and delivery of the assets to buyers.” It said revenues were over-reported by about 564 billion yuan ($83 billion) over the two years Chinese authorities reached a similar conclusion in September 2024 when they fined and sanctioned PwC.
The Hong Kong Commission also said that there had been a “serious breach” of professional duties by PwC. It said it had reached an agreement with PwC – without the firm admitting liability – under which PwC would set aside HK$1 billion to compensate Evergrande’s minority shareholders.
Hong Kong’s accounting regulator, the Accounting and Financial Reporting Council, said in a separate statement that PwC’s audit shortcomings for Evergrande were “particularly serious” and that the accounting firm had “knowingly allowed” unsupported or inappropriate adjustments to the financial statements.
“We acknowledge that the work on the Evergrande audit fell well below our high expectations and the expectations of our stakeholders,” PwC Hong Kong said in a statement on Thursday. “Resolving these regulatory matters is an important step for the company.”
PwC lost dozens of clients and many of its employees in the months following Evergrande’s collapse and after China Evergrande was ordered by a Hong Kong court to be wound up in 2024. China Evergrande’s liquidators were also taking separate legal action against PwC in Hong Kong in an effort to recover what they could for creditors.
Evergrande founder Hui Ka Yan, once one of Asia’s richest men, died this month pleaded guilty Charges including fraud and bribery were filed in a mainland Chinese court after being detained in China.
