Hong Kong Audit Regulator Investigates Evergrande’s Accounts and Its Accounting Firm’s Audit

【Japan Himalaya League】 Author: 幽蘭自得  Translator: Ranting

Hong Kong’s audit regulator said on Oct. 15 that it was concerned about the adequacy of Evergrande’s reporting on going concern and was investigating the 2020 annual accounts of China Evergrande Group and the audit of Evergrande’s 2020 annual accounts by PricewaterhouseCoopers(PwC).

The Financial Reporting Council noted that Evergrande’s cash and cash equivalents in its books at the end of 2020 totaled 159 billion yuan (about $24.7 billion), but this does not include its current debt of 1.5 trillion yuan and has borrowings of 167 billion yuan due in 2022.

(Picture Source: Internet.)

The Financial Reporting Council said Evergrande’s accounts did not clearly state whether there was significant going concern uncertainty before or after the impact of the implementation plan, which Evergrande had said it had to mitigate the potential impact on cash flow.

The FRC also said that PricewaterhouseCoopers issued an unmodified audit opinion in the audit report on Evergrande’s 2020 annual accounts, but failed to mention that there is significant uncertainty about whether Evergrande is a going concern.

In addition, the Financial Reporting Council said they had received a public complaint about matters related to Evergrande’s 2020 annual accounts and 2020 annual audit prior to the investigation.

The cash-strapped Evergrande Group has been divesting a number of assets one after another to pay off its outstanding debts as they fall due. The group, which now has a debt of US$300 billion, has failed to repay its overseas creditors’ coupons on time three times.

Post Script: This article only represents the view of the author.

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Posted by: Ranting

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