HONG KONG (AP) 鈥� PwC, one of the world’s biggest accounting firms, is paying HK$1.3 billion ($166 million) in fines and compensation in Hong Kong over its audit work for the 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 a public reprimand to two of its former partners for misconduct, fining each of them a separate HK$5 million.
China Evergrande, one of China鈥檚 biggest property developers and once deemed 鈥渢oo big to fail,鈥� in 2021 and became the world鈥檚 most indebted developer with roughly $300 billion in liabilities. Its rapid downfall was the most prominent case of failure in China鈥檚 property sector, which was embroiled in a liquidity crisis after authorities cracked down on excessive borrowing in the industry as many other developers had also defaulted or underwent restructuring.
The property sector slump in China has still , which has weighed on home prices across the country and impacted consumption and investment sentiment, dragging on China’s broader economic growth.
In 2024, PwC was fined 441 million yuan ($62 million) over its Evergrande audit. Chinese authorities also imposed a six-month ban on the accounting firm over 鈥渇alse鈥� conclusions in its audit reports for Evergrande and 鈥渟erious defects鈥� in its auditing procedures.
Hong Kong鈥檚 Securities and Futures Commission said Thursday it had investigated PwC鈥檚 work relating to Evergrande鈥檚 financial statements for 2019 and 2020 and found that its annual revenue and profits were 鈥渟ubstantially overstated.鈥�
It said Evergrande had manipulated annual revenue and profits by 鈥減rematurely recognising revenue from property sales before the completion and delivery of properties to buyers.鈥� Revenues were overstated by roughly 564 billion yuan ($83 billion) over the two years, it said, after Chinese authorities reached a similar conclusion in September 2024 when it imposed its fine and ban on PwC.
The Hong Kong commission also said there were 鈥渟erious breaches鈥� of professional duties by PwC. It said it had reached an agreement with PwC 鈥� without an admission of liability by the firm 鈥� under which PwC would be setting aside HK$1 billion for compensating minority shareholders of Evergrande.
Hong Kong鈥檚 accounting regulator, the Accounting and Financial Reporting Council, said in a separate statement that PwC鈥檚 audit deficiencies for Evergrande were 鈥減articularly egregious鈥� and that the accounting firm had 鈥渒nowingly permitting鈥� unsupported or unjustified adjustments in the financial statements.
鈥淲e acknowledge that the work on the Evergrande audits fell well below our high expectations and the expectations of our stakeholders,鈥� PwC Hong Kong said in a statement on Thursday. 鈥淩esolving these regulatory matters is an important step for the firm.鈥�
PwC had lost dozens of clients and many of its staff following Evergrande鈥檚 downfall and in the months after China Evergrande was ordered by a Hong Kong court to be liquidated in 2024. Liquidators of China Evergrande were also pursuing legal action against PwC separately in Hong Kong in an attempt to recover what it could for creditors.
Evergrande founder Hui Ka Yan, once one of Asia’s richest persons, this month to charges including fraud and bribery in a mainland Chinese court after being detained in China.
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