PWC inquiry into ‘false’ Evergrande claims
‘The statements and false allegations could tarnish Pwc’s reputation and infringe our legal rights’
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: “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 “false” open letter also 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 letter comes weeks after reports that Chinese authorities are scrutinising Pwc’s role in the alleged accounting fraud. Chinese officials are reportedly in contact with 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.
The firm 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.
The open letter follows reports that Evergrande’s liquidators are considering launching a professional negligence lawsuit against PWC.
Restructuring specialists at Alvarez & Marsal, appointed as liquidators of Evergrande’s Hong Kong-listed holding company in January, have consulted legal advisers about potential legal action, the Financial Times reported.
The early-stage talks do not suggest that the liquidators have discovered any evidence of wrongdoing by PWC or that creditors have lost out as a result.
Alvarez & Marsal was contacted for comment.