The Hong Kong Institute of Certified Public Accountants (HKICPA) has said high-quality auditing is the cornerstone that can maintain market confidence and integrity of the city’s capital market.
The accounting profession’s statutory body was responding to the Securities and Futures Commission’s (SFC) Thursday announcement that it has reached an agreement with PricewaterhouseCoopers Hong Kong (PwC HK) for the auditor to set aside HK$1 billion ($128 million) to compensate independent minority shareholders of Chinese mainland developer China Evergrande Group.
“The HKICPA will continue to work closely with the Accounting and Financial Reporting Council (AFRC), the SFC, and other regulatory bodies and stakeholders to persistently enhance and promote the professional standards of the Hong Kong accounting sector, thereby ensuring public confidence in the services provided by the profession and strengthening Hong Kong’s position as an international financial center,” the HKICPA said in a statement.
“The outcomes reached with the AFRC and SFC conclude regulatory matters related to the Evergrande audits from over five years ago with no impact for our existing clients. We are moving forward with a clear focus on delivering the highest quality services to our clients and supporting the capital markets,” PwC China Chairman and CEO Hemione Hudson said.
PwC China has taken accountability and remediation measures after the incident, such as appointing new leadership and closing the relevant audit branch.
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In the SFC statement, the securities industry watchdog said an investigation found that China Evergrande Group, which is currently in liquidation, had substantially overstated its annual revenue and profits in 2019 and 2020.
It noted that there was "market misconduct" and "serious breaches" of professional duties by PwC HK, who was the auditor of the now defunct company.
SFC added that the mainland developer had "manipulated" its annual revenue and profits by "prematurely recognizing revenue from property sales before the completion and delivery of properties to buyers".
The regulator concluded that China Evergrande Group's audited annual revenue was overstated by around 45 percent in 2019, and 69 percent in 2020. As a result, its audited profit for those two years of 33.5 billion yuan ($4.9 billion) and 31.4 billion yuan should have been a loss of 7.12 billion yuan and 19.9 billion yuan, respectively.
SFC Chief Executive Julia Leung Fung-yee said in the statement that it is the first time an auditor of a defunct company is compensating independent minority shareholders who were harmed by false and misleading financial statements.
"This will send an unequivocal message to the audit profession and the investing public that the SFC is committed to maintain market integrity and to protect investors," Leung said.
The SFC also noted that under its agreement with PwC HK, the two sides agreed the matter would be fully and finally resolved without admission of liability, and that the SFC would take no further action against PwC HK, provided that PwC HK fulfils the terms of the agreement.
AFRC said it has fined PwC HK HK$300 million and imposed a six-month practice limitation on the firm from accepting, performing or issuing auditing reports in respect to new clients of listed firms.
The indebted mainland developer was delisted from the Hong Kong Stock Exchange in August 2025 after the Hong Kong High Court handed down a liquidation order in January 2024, saying the company had failed to provide a viable plan to restructure its liabilities of more than $300 billion.
