Adam Mawardi
Tue, 16 April 2024
Evergrande
PwC is planning to investigate an anonymous letter containing “false allegations” over how the firm “turned a blind eye” to its audit of Chinese property giant Evergrande.
The Big Four accountancy firm has rejected accusations that senior figures committed failures while auditing the world’s most indebted property developer, which filed for bankruptcy last year.
The letter, written in Chinese and entitled “Who brought PwC into the fire pit of Evergrande?”, claims to have been signed by some unnamed partners at the firm.
PwC Hong Kong said: “We believe the letter contains inaccurate statements and false allegations concerning PwC and certain of our partners. The inaccurate statements and false allegations could tarnish PwC’s reputation and infringe our legal rights.”
“Our firm is treating this incident with high priority and is taking a series of appropriate measures and will fully investigate this matter.”
PwC Hong Kong said it has reported the incident to the relevant authorities.
The anonymous letter claimed that the Chinese property giant’s financial fraud was so serious that PwC “turned a blind eye” to its audit for more than a decade.
It also accused certain senior partners at PwC of refusing to participate in regulatory inspections by Hong Kong and US regulators.
The open letter urged PwC to hire independent experts to review the firm’s governance, culture and accountability.
The anonymous authors purportedly warned they will release a second open letter and relevant audit documents if there is retaliation against any PwC partner.
The Telegraph is unable to verify who wrote the letter and its claims.
It comes after Evergrande was accused last month of fraudulently inflating its revenues by 560bn yuan (£62bn) in the years leading up to its collapse in 2021.
The China Securities Regulatory Commission fined Evergrande 4.175bn yuan (£456m) and its founder, Hui Ka Yan, 47m yuan (£5.1m). Mr Hui was also given a lifetime ban from participating in China’s stock markets.
The anonymous letter comes weeks after reports that Chinese authorities are now scrutinising PwC’s role in the alleged accounting fraud.
Chinese officials are reportedly in contact with some former PwC accountants who audited Evergrande, although no decision has been made on whether to penalise PwC, Bloomberg reported.
PwC declined to comment on the investigation by Chinese authorities.
PwC resigned as Evergrande’s auditor last year following disagreements relating to the developer’s 2021 accounts.
It joined the list of international auditors resigning from heavily indebted Chinese property developers amid concerns over hidden debts.
In January, Evergrande was handed a winding-up order by a Hong Kong court after repeatedly failing to devise a plan to restructure its debts since officially defaulting in 2021.
The Guangzhou-based developer has become a symbol of China’s property crisis, with more than $300bn owed to banks and bondholders.
PwC Hong Kong denies claims about China Evergrande audits in anonymous letter
Ben Lucas
Tue, 16 April 2024
The Big Four firm has come under scrutiny after Chinese authorities launched one the biggest-ever fraud investigations into Evergrande. (Photo by Getty Images)
PwC Hong Kong has denied claims set out in an anonymous letter circulating on Chinese social media about its audit work for property developer China Evergrande Group.
The letter, according to multiple reports, detailed several allegations of auditing failures by the firm. Many of the reports said they were unable to verify the authenticity of the letter.
PwC Hong Kong said it was aware of the letter, which was purportedly authored by individuals claiming to be partners at the firm, and was investigating the matter.
“We believe the letter contains inaccurate statements and false allegations” concerning PwC and its partners, the firm said in a statement on its website, adding that these allegations “could tarnish PwC’s reputation and infringe our legal rights”.
“We have promptly reported this matter to the relevant authorities and reserve our right to pursue appropriate action,” the firm said.
The Big Four firm has come under scrutiny after Chinese authorities launched one the biggest-ever fraud investigations into Evergrande.
The developer and its founder, Hui Ka Yan, have been accused of inflating its revenue by $78bn (£61.6bn) in the years before the firm defaulted on its debts.
Following an investigation, the China Securities Regulatory Commission last month fined Evergrande’s mainland business, Heganda Real Estate, and its founder, Hui Ka Yan, $580m and $6.5m respectively following the investigation. It also banned Hui from China’s markets for life.
Evergrande and PwC have also been under investigation by Hong Kong’s audit regulator since 2021, while Bloomberg reported last month that mainland Chinese authorities are also investigating PwC’s potential role in Evergrande’s accounting practices. PwC formally resigned as Evergande’s auditor in January last year following disagreements over matters related to the company’s 2021 accounts.
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