Hong Kong regulators said on Wednesday they had partially cleared PwC of allegations of deficiencies in its auditing of Chinese real estate giant Evergrande following an investigation triggered by a whistle-blower report.
Heavily indebted Evergrande became the poster child of the years-long crisis in China’s real estate market, and its onshore unit was accused of a $78 billion (R1.4 trillion) revenue overstatement in March.
Once China’s biggest real estate firm, it was ordered liquidated by a Hong Kong court in January after struggling for years to repay creditors following a 2021 default. Beijing regulators in May fined its flagship onshore unit $576 million for fraudulent practices.
PwC was Evergrande’s auditor for more than a decade before resigning last year amid disagreements over the audit of the firm’s 2021 accounts.
In April, Hong Kong’s Accounting and Financial Reporting Council said it had opened a probe into PwC after an anonymous letter – titled “Who led PwC into the firepit that was Evergrande?” – was circulated expressing concern over the quality of the audit.
PwC condemned the letter at the time, saying it contained “inaccurate statements and false allegations”.
On Wednesday, the accounting council said three allegations regarding PwC’s quality management systems were not supported by a “rigorous review of the internal investigation carried out by PricewaterhouseCoopers”.
Those allegations concerned ineffective audit quality control and compliance, improprieties in the maintenance of the client relationship with Evergrande, and inappropriate appointments of key personnel.
The council added that a separate investigation into one allegation regarding the quality of PwC’s audits was “still ongoing”.
“We are committed to upholding public trust in the auditing profession and will not hesitate in taking all necessary actions,” its statement said.
PwC did not immediately respond to a request for comment following the announcement.
AFP