Hong Kong regulator to probe PwC auditing role over Evergrande

Hong Kong’s accounting regulator said it will investigate allegations over PricewaterhouseCoopers LLP’s role auditing China Evergrande Group following a “whistleblower report.”

The Accounting and Financial Reporting Council said in a statement Friday the report that has been circulating “expressed significant concerns” regarding potential alleged deficiencies in PwC’s systems of quality management and the quality of its audits of Evergrande.

“Given the gravity of these allegations,” the AFRC is “obliged to initiate an investigation,” it said.

The probe comes after PwC on Tuesday said it will investigate an anonymous letter circulating on social media that made “false allegations” about the company and its partners over its role in auditing Evergrande. PwC Hong Kong has reported it to relevant authorities, and is “treating this incident with high priority,” it said.

The auditing firm has been under the spotlight after China launched one of the biggest investigations of financial fraud in history. Authorities said developer Evergrande’s main onshore unit overstated its revenue in the two years through 2020. The government is examining PwC’s role as a former auditor for the real estate company, people familiar said in March.  

The AFRC said it won’t hesitate to take stringent enforcement actions against any firms and individuals if they are found to have committed any misconduct or violated the AFRC Ordinance.

PwC has run into trouble in other regions. It pledged to boost governance controls in Australia over questions of a serious conflict of interest in leaking government tax plans to its clients. Its U.K. network was also fined £5.6 million ($7 million) for failures in auditing Babcock International Group Plc.