The Securities and Futures Commission (SFC) said PwC failed as a market 'gatekeeper' through critical breaches including lack of scepticism, poor verifications, and failure to verify the authenticity of supporting financial records. The fine is the first in Hong Kong history where auditors of a defunct company have provided direct compensation to shareholders misled by financial statements.
PwC resigned as Evergrande's auditor in January 2023 following disagreements over the audit of the 2021 accounts. The SFC launched a probe into PwC's audit of the property giant. PwC Hong Kong settled without admitting liability, and the SFC will take no further action provided terms are met. Separately, Chinese authorities banned PwC China for six months and fined it over the Evergrande collapse, prompting a double-digit number of partners to leave.
The move sends an 'unequivocal message' that both listed companies and their auditors will be held accountable for the reliability of financial disclosures.
Evergrande filed for bankruptcy in the US in 2023 with over $300bn in debt. A Hong Kong court ordered the company to liquidate in 2024 after it failed to reach a restructuring deal with creditors. PwC Hong Kong is also facing a lawsuit by Evergrande's liquidators over alleged negligence and misrepresentation in the audit.
SFC chief executive Julia Leung said the move sends an 'unequivocal message' that both listed companies and their auditors will be held accountable for the reliability of financial disclosures. Michael Duignan, SFC executive director of enforcement, said: 'When audit firm personnel actively undermine the very controls meant to ensure accurate reporting, it erodes investor confidence, damages market integrity, and shakes the foundation of accountability upon which our markets depend.'
When audit firm personnel actively undermine the very controls meant to ensure accurate reporting, it erodes investor confidence, damages market integrity, and shakes the foundation of accountability upon which our markets depend.