Gate News message, April 23 — Hong Kong’s Securities and Futures Commission (SFC) has reached an agreement with PricewaterhouseCoopers Hong Kong (PwC Hong Kong) requiring the auditing firm to set aside HKD 1 billion (approximately USD 128 million) to compensate qualified independent minority shareholders of China Evergrande Group for losses stemming from falsified financial statements and audit failures.
The SFC’s investigation found that China Evergrande significantly overstated revenues and profits in its 2019 and 2020 financial years. Specifically, 2019 revenues were inflated by RMB 213.9 billion (44.79%), and 2020 revenues were inflated by RMB 350.2 billion (69.03%). Consequently, 2019 profits reported as RMB 33.5 billion should have been a loss of RMB 7.12 billion, while 2020 profits reported as RMB 31.4 billion should have been a loss of RMB 19.9 billion. The overstatement occurred because Evergrande prematurely recognized property sales revenue before properties were completed and delivered to buyers.
PwC Hong Kong, which audited Evergrande’s financial statements for both years, failed to maintain auditor independence, lacked sufficient professional skepticism, did not design effective site inspections to verify property construction status, and tacitly permitted management to manipulate audit samples. The SFC determined these actions constituted serious breaches of professional responsibility. Under the settlement, reached without admission of liability by PwC, the compensation will be distributed through an independent administrator. Evergrande was delisted from the Hong Kong Stock Exchange in August 2025.
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