{"text":[[{"start":12.65,"text":"Two of Hong Kong’s financial regulators have fined PwC a combined HK$1.3bn ($166mn) and imposed a six-month ban on taking new audit clients following an investigation into the accounting firm’s work for the collapsed property developer Evergrande."}],[{"start":30.950000000000003,"text":"The Securities and Futures Commission said on Thursday that the Big Four firm committed “serious breaches of auditors’ professional duties” during its audits of Evergrande in 2019 and 2020. "}],[{"start":44.45,"text":"The SFC said PwC’s Hong Kong business would set aside HK$1bn to compensate Evergrande’s independent minority shareholders, after concluding a four-year investigation that began shortly after Evergrande’s 2021 debt default sent shockwaves through the Chinese property sector."}],[{"start":63.2,"text":"Hong Kong’s accounting regulator said in a separate announcement that it had banned PwC from working on audits for new public interest clients for six months, calling the accounting failures “egregious”. It marks the first such ban imposed by the regulator."}],[{"start":77.5,"text":"The Accounting and Financial Reporting Council also fined two of PwC’s former partners a total of HK$10mn for misconduct in the audits, in addition to its HK$300mn fine on the firm. "}],[{"start":91.55,"text":"Evergrande was once one of China’s largest property developers. Its default in 2021 alerted the world to a cash crunch in the country’s heavily indebted property sector and its collapse roiled the economy, where a large amount of household wealth is held in real estate. "}],[{"start":107,"text":"Hui Ka Yan, Evergrande’s founder, was once one of Asia’s richest people, but earlier this month pleaded guilty in a Shenzhen court to charges of bribery, embezzlement and fraud."}],[{"start":118.2,"text":"The SFC said that PwC “actively acquiesced to manipulation by China Evergrande”, failed to properly check the authenticity of the group’s records, and did not “exercise adequate professional scepticism”."}],[{"start":132.4,"text":"PwC did not admit liability in relation to the SFC’s accusations. "}],[{"start":137.8,"text":"The Accounting and Financial Reporting Council said PwC “disregarded evidence” of premature revenue recognition and “knowingly” permitted “unjustified accounting entries” and missed “multiple red flags indicating elevated risks of material misstatements”."}],[{"start":154.70000000000002,"text":"PwC’s partners had improperly prioritised developing client relationships over audit quality, the regulator said, and developed a “substantial financial dependence” on Evergrande, which “created a significant self-interest and/or intimidation threat”."}],[{"start":169.3,"text":"The Big Four firm had acted as the reporting accountant for Evergrande’s listing in 2009 and as its group auditor until early 2023, giving unmodified audit opinions on the company’s financial statements."}],[{"start":182.4,"text":"International bosses parachuted in the UK executive Hemione Hudson to run PwC China two years ago with a mandate to reform the audit practice and persuade clients to stick with the firm."}],[{"start":193.95000000000002,"text":"The accounting regulator said that PwC had allowed Evergrande’s material financial misstatements to go “unchallenged, thereby enabling the presentation of a misleading and distorted financial position”. It also criticised “substantial weaknesses” in PwC’s governance and monitoring controls."}],[{"start":213.05,"text":"Beijing regulators ruled in 2024 that PwC’s mainland business “concealed or even condoned” fraud at Evergrande in the years leading up to its collapse, levied a Rmb441mn fine and froze the firm out of auditing state-owned companies. The Hong Kong action adds to the financial fallout for the Big Four firm."}],[{"start":234.55,"text":"PwC China, which includes the Hong Kong firm, acknowledged that its work on the Evergrande audits “fell well below our high expectations and the expectations of our stakeholders. Resolving these regulatory matters is an important step for the firm.” "}],[{"start":249.8,"text":"The firm said it had “taken decisive accountability and remediation measures and also implemented a thorough programme over the last two years that has strengthened culture, quality, and governance. This included appointing new leadership and closing the relevant audit branch.”"}],[{"start":267.2,"text":"Michael Duignan, the SFC’s 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.”"}],[{"start":286.09999999999997,"text":"PwC’s Hong Kong business is being sued by the liquidators of Evergrande’s Hong Kong-listed parent company."}],[{"start":301.59999999999997,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1776989228_4394.mp3"}