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AFRC Investigates PwC for Involvement with Evergrande in Hong Kong

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Article Summary

TLDR:

  • Hong Kong regulators have opened an investigation into PricewaterhouseCoopers (PwC) and its relationship with China Evergrande following claims made in a whistle-blower report.
  • The anonymous letter expressed concerns about potential deficiencies in PwC’s quality management systems and audits of Evergrande.

Article Summary:

Hong Kong’s Accounting and Financial Reporting Council (AFRC) has launched a probe into PwC’s role at Evergrande after reports of dodgy bookkeeping at the bankrupt developer surfaced. The investigation was triggered by allegations in a whistle-blower report circulating in Chinese media, which raised concerns about deficiencies in PwC’s quality control system and audit quality for Evergrande. The AFRC stated that it will take strict enforcement actions if misconduct is found.

The letter, purportedly written by individuals claiming to be PwC partners, accused the firm of not adhering to professional standards in its dealings with Evergrande and neglecting to assign appropriate personnel for quality management. PwC’s China arm denied the allegations, stating that the letter contained inaccurate statements and false allegations.

Chinese authorities have also been examining PwC’s work as Evergrande’s auditor, after the real estate giant’s onshore flagship was found to have committed financial fraud by overstating revenue. PwC resigned as Evergrande’s auditor in January 2023, citing a lack of information from the company.

Overall, the investigation highlights the importance of maintaining audit quality, professional standards, and public confidence in the accounting profession. The outcome of the probe could impact PwC’s reputation and financial liability in connection with Evergrande’s financial woes.


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