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Hong Kong’s Audit Regulator Says Allegations Against PwC in Letter Not Supported

(Brent Lewin/Photographer: Brent Lewin/Bloomb)

(Bloomberg) -- Hong Kong’s audit regulator said it found no supporting evidence for some of the allegations made against PricewaterhouseCoopers LLP in an anonymous whistleblower letter that circulated on social media in April.

The Accounting and Financial Reporting Council said that it found no support for the claims the firm had failed to establish effective quality controls, failed to adhere to professional standards in its client relationship with China Evergrande Group and failed to assign appropriate personnel to key positions, according to a statement Wednesday. 

The auditing watchdog said that it’s still carrying out a separate investigation into the audits carried out by PwC on Evergrande.

PwC said in April said the letter contained inaccuracies and that it had reported it to relevant authorities. 

The Big Four accounting firm is under pressure after China started one of the biggest probes into financial fraud in history. Authorities allege that Evergrande, a major real estate developer, overstated revenue of $78 billion in the two years through 2020 leading up to its default. 

Beijing is weighing a record fine of more than 1 billion yuan against PwC for its audit work on Evergrande, Bloomberg News reported in May. 

PwC is cutting staff across its China operations, according to people familiar with the matter. More than 30 listed firms in China cut ties with PwC since China announced its accusations on Evergrande, stoking unease among clients and staffers. 

At least 100 staffers from different teams at PwC China’s offices in Beijing, Shanghai and other locations are being let go, the people said, asking not to be identified discussing private matters. More than half of one team was laid off, according to one of the people. The final tally of cuts across the firm wasn’t immediately clear.

Raymund Chao, the person of interest as claimed in the open letter to be responsible for PwC’s Evergrande involvement, retired at the end of June. 

He was succeeded by Daniel Li, the first leader from the Chinese mainland to hold the position of Asia Pacific and China Chair. 

©2024 Bloomberg L.P.

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