PwC to face Hong Kong probe over Evergrande audit
Hong Kong’s audit watchdog has launched an investigation into PwC over its audit of embattled Chinese real estate developer Evergrande.
The city-state’s Financial Reporting Council (FRC) today said it had opened an investigation into the Big Four accountancy firm’s audit of the heavily-indebted property firm’s 2020 results.
The probe comes after PwC signed off on Evergrande’s accounts just months before the Shenzhen property company defaulted on its international debts last December.
Evergrande, China’s second largest property developer, currently has around $300bn (£250bn) of liabilities, including $20bn of international bonds.
The investigation is set to up the pressure being placed on PwC over its audits of the Chinese company, after the accountancy firm repeatedly signed off on the Evergrande’s accounts since it first listed on the Hong Kong stock exchange in 2009.
The Hong Kong watchdog’s investigation will also look at Evergrande’s financial statements for the year ended 31 December 2020 and the six months ended 30 June 2021.
In launching its investigation, the watchdog said it had identified “questions” about the Chinese developer’s accounts in light of public statements it made last month.
Evergrande on 22 July said an internal probe had discovered $2bn worth of funds held by one of Evergrande’s subsidiaries was used to guarantee financing by the group for debt repayment.
The FRC said its investigation will look at the way in which Evergrande and PwC classified “restricted bank deposits and other loans” in the real estate developer’s accounts.
The probe will also examine the way in which those loans were guaranteed and the way in which third party transactions were reported.
PwC refused to comment. Evergrande have been approached for comment.