PwC Hong Kong Partners Will Not Receive Millions of 5-Year Payout from Sale of PwC Business Unit in 2022 with Remaining Amount to be Retained for Operations & Investments, PwC Hong Kong Partners Will Instead Get Initial 3-Year Payout
7th June 2026 | Hong Kong
PwC Hong Kong Partners will not receive millions of 5-year payout from sale of PwC business unit in 2022 with the remaining amount to be retained by PwC for operations & investments. PwC Hong Kong Partners will instead get the initial 3-year payout. In 2026 May, bankrupt property giant China Evergrande with $300 billion debts liquidators Hong Kong lawsuit are seeking $8.4 million (CNY 57 billion) compensation from big 4 audit firm entities PwC International, China Mainland & Hong Kong for negligence & misrepresentation. In 2026 April, Hong Kong authorities (SFC & AFRC) issued big 4 audit firm PwC Hong Kong with $167 million (HKD 1.31 billion) fines & shareholders compensation and 6-month ban (New clients) for audit failures in bankrupt property giant China Evergrande with $300 billion debts – 1) Hong Kong SFC requires PwC Hong Kong to compensate $127.6 million (HKD 1 billion) to eligible China Evergrande minority shareholders & 2) Hong Kong Accounting and Financial Reporting Council (AFRC) has fined PwC Hong Kong $38.3 million (HKD 300 million) & 2 PwC ex-Partners (Cheung Siu Cheong & Chow Sai Keung) $1.3 million (HKD 10 million) and imposed 6-month ban for new clients. In 2026 April, China Evergrande founder & billionaire Hui Ka Yan with once-$42 billion fortune pleaded guilty to fraud, illegal fundraising, bribery, misuse of funds & embezzlement in a China court after collapse of bankrupt property giant China Evergrande with $300 billion debts. In 2024, Hui Ka Yan was fined $6.6 million (CNY 47 million) & banned for life in China securities market in 2024. In 2026 March, bankrupt property giant China Evergrande with $300 billion debts Hong Kong court hearing between liquidators and PwC & PwC Mainland China unit will start in 2026 May (18/5/26) to determine if PwC will be included in liquidators China Evergrande assets recovery claims. In 2024 September, China regulators issued PwC China a 6-month ban & $62 million (CNY 441 million) fine for failure in audit of collapsed China Evergrande. China Ministry of Finance issued a $16.3 million (CNY 116 million) fine & confiscation of illegal gains on PwC Zhong Tian, and the China Securities Regulatory Commission issued a $45.8 million (CNY 325 million) fine & confiscation of illegal gains. See below for full details:
“ PwC Hong Kong Partners Will Not Receive Millions of 5-Year Payout from Sale of PwC Business Unit in 2022 with Remaining Amount to be Retained for Operations & Investments, PwC Hong Kong Partners Will Instead Get Initial 3-Year Payout “
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Hong Kong Authorities (SFC & AFRC) Issues Big 4 Auditor Firm PwC Hong Kong with $167 Million (HKD 1.31 Billion) Fines & Shareholders Compensation and 6-Month Ban (New Clients) for Audit Failures in Bankrupt Property Giant China Evergrande with $300 Billion Debts, 1) Hong Kong SFC Requires PwC Hong Kong to Compensate $127.6 Million (HKD 1 Billion) to Eligible China Evergrande Minority Shareholders & 2) Accounting and Financial Reporting Council (AFRC) Fines PwC Hong Kong $38.3 Million (HKD 300 Million) & 2 PwC ex-Partners (Cheung Siu Cheong & Chow Sai Keung) $1.3 Million (HKD 10 Million) and Imposed 6-Month Ban for New Clients
25th April 2026 – Hong Kong authorities (SFC & AFRC) have issued big 4 audit firm PwC Hong Kong with $167 million (HKD 1.31 billion) fines & shareholders compensation and 6-month ban (New clients) for audit failures in bankrupt property giant China Evergrande with $300 billion debts – 1) Hong Kong SFC requires PwC Hong Kong to compensate $127.6 million (HKD 1 billion) to eligible China Evergrande minority shareholders & 2) Hong Kong Accounting and Financial Reporting Council (AFRC) has fined PwC Hong Kong $38.3 million (HKD 300 million) & 2 PwC ex-Partners (Cheung Siu Cheong & Chow Sai Keung) $1.3 million (HKD 10 million) and imposed 6-month ban for new clients. In 2026 April, China Evergrande founder & billionaire Hui Ka Yan with once-$42 billion fortune pleaded guilty to fraud, illegal fundraising, bribery, misuse of funds & embezzlement in a China court after collapse of bankrupt property giant China Evergrande with $300 billion debts. In 2024, Hui Ka Yan was fined $6.6 million (CNY 47 million) & banned for life in China securities market in 2024. In 2026 March, bankrupt property giant China Evergrande with $300 billion debts Hong Kong court hearing between liquidators and PwC & PwC Mainland China unit will start in 2026 May (18/5/26) to determine if PwC will be included in liquidators China Evergrande assets recovery claims. In 2024 September, China regulators issued PwC China a 6-month ban & $62 million (CNY 441 million) fine for failure in audit of collapsed China Evergrande. China Ministry of Finance issued a $16.3 million (CNY 116 million) fine & confiscation of illegal gains on PwC Zhong Tian, and the China Securities Regulatory Commission issued a $45.8 million (CNY 325 million) fine & confiscation of illegal gains. See below for full details:
Hong Kong SFC (23/4/26) – SFC reaches agreement with PricewaterhouseCoopers for shareholder compensation of HK$1 billion regarding false financial statements of China Evergrande Group for 2019 and 2020
- The Securities and Futures Commission (SFC) has reached an agreement with PricewaterhouseCoopers Hong Kong (PwC HK) under which PwC HK has agreed to set aside HK$1 billion to compensate eligible independent minority shareholders of China Evergrande Group (China Evergrande) (Note 1).
- PwC HK audited China Evergrande’s financial statements for the fiscal years ended 31 December 2019 and 31 December 2020 (FY2019 and FY2020 respectively). The SFC’s investigation, which focused on China Evergrande’s results announcements and annual reports, found that the company, currently in liquidation, had substantially overstated its annual revenue and profits for these two fiscal years. The SFC also examined the role of PwC HK and concluded that there was market misconduct due to China Evergrande’s dissemination of false and misleading financial information and serious breaches of auditors’ professional duties.
- Under the agreement, the SFC and PwC HK have agreed that the matter will be fully and finally resolved without admission of liability, and that the SFC will take no further action against PwC HK, provided that PwC HK fulfils the terms of the agreement.
False and misleading statements of China Evergrande
- The SFC has determined that China Evergrande’s annual reports and results announcements for FY2019 and FY2020 contained materially false or misleading information, particularly regarding revenue recognition. China Evergrande manipulated its annual revenue and profits by prematurely recognising revenue from property sales before the completion and delivery of properties to buyers, with the intent to substantially overstate its audited annual revenue and profits.
- The SFC concluded that China Evergrande’s audited annual revenue was overstated by RMB213.9 billion or by 44.79% for FY2019 and RMB350.2 billion or by 69.03% for FY2020. Consequently, the company’s audited annual profit of RMB33.5 billion and RMB31.4 billion for FY2019 and FY2020, respectively, should have been a loss of RMB7.12 billion and RMB19.9 billion, respectively.
Auditor’s role and failures
- For FY2019 and FY2020, PwC HK was the auditor of China Evergrande and PricewaterhouseCoopers Zhong Tian LLP assisted PwC HK in the audits of China Evergrande’s financial statements.
Whilst this is not admitted by PwC HK, the SFC considers that PwC HK:
- in its role as auditor of China Evergrande was concerned in the disclosure of false or misleading information, within the terms of section 277 of the Securities and Futures Ordinance (SFO) (Note 2);
- failed to maintain auditor independence during the audits of China Evergrande’s FY2019 and FY2020 financial statements;
- failed to exercise adequate professional scepticism in audit planning, performing the audit procedures and handling audit irregularities;
- failed to design and perform effective site inspections to ascertain the construction and delivery status of properties for proper revenue recognition;
- actively acquiesced to manipulation by China Evergrande’s management of audit samples and site inspections which facilitated the concealment of the premature revenue recognition; and
- failed to sufficiently verify the authenticity of supporting documents and records.
With the ultimate objective of securing compensation for shareholders, the SFC has determined that the best interests of China Evergrande’s independent minority shareholders are served by reaching an agreement with PwC HK, under which HK$1 billion has been set aside for allocation to compensate these independent minority shareholders through a process overseen by an independent administrator. The detailed provisions of the compensation process will be published in due course.
In the meantime, China Evergrande’s independent minority shareholders and their intermediaries are reminded to retain records of transactions involving the company’s shares, for the purpose of making claims for compensation. Intermediaries are also reminded to provide reasonable assistance to such shareholders to file their claims.
“For the first time, auditors of a defunct company are providing compensation to independent minority shareholders who were harmed by false and misleading financial statements,” said Ms Julia Leung, the SFC’s Chief Executive Officer. “This will send an unequivocal message to the audit profession and the investing public that the SFC is committed to maintain market integrity and protect investors by holding listed companies and their auditors accountable for the accuracy and reliability of financial disclosures”.
Mr Michael Duignan, the SFC’s Executive Director of Enforcement, said: “Auditors act as essential gatekeepers and contributors to the level of trust in our financial system. 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. In such circumstances, the SFC will seek to take action to protect the interests of affected shareholders.”
The SFC also expresses its profound gratitude to the Ministry of Finance and the China Securities Regulatory Commission for their unwavering support and invaluable assistance during the SFC’s investigation. This highlights the strong cooperations among the three regulators in combating market misconduct and protecting the investing public.
Notes:
- China Evergrande was listed on the Main Board of The Stock Exchange of Hong Kong Limited in November 2009 under the stock code 3333 and subsequently delisted in August 2025. China Evergrande was once one of the largest property developers in China.
- Section 277 of the SFO prohibits the disclosure of materially false or misleading information likely to induce investment decisions or materially affect securities prices.
Hong Kong AFRC (23/4/26) – AFRC imposes HK$300 million fine and six-month practice limitation on PricewaterhouseCoopers and HK$10 million in fines on its two former registered responsible persons over the Evergrande Audits
The Accounting and Financial Reporting Council (AFRC) has sanctioned PricewaterhouseCoopers (PwC)1 and two of its former partners and registered responsible persons, Mr Cheung Siu Cheong (Cheung) and Mr Chow Sai Keung (Chow)2, for misconduct in connection with PwC’s audits of the consolidated financial statements of:
- (i) China Evergrande Group (in liquidation) (Company) (previous stock code: 03333, delisted) and its subsidiaries (collectively, the Group) for the years ended 31 December 2019 and 2020 (Evergrande Group Audits);
- (ii) Evergrande Property Services Group Limited (stock code: 06666) and its subsidiaries for the year ended 31 December 2020; and
- (iii) China Evergrande New Energy Vehicle Group Limited (stock code: 00708) and its subsidiaries for the year ended 31 December 2020 (Evergrande Vehicle Audit)
(collectively, the Evergrande Audits).
- PwC acted as the reporting accountant for the Company’s listing in 2009 and subsequently served as the Company’s group auditor from listing until early 2023. It conducted each of the Evergrande Audits and expressed unmodified audit opinions on the consolidated financial statements. At the time of the Evergrande Audits, the Group was a large business group with principal operations in property development and investment, property management, new energy vehicles and other sectors in the Chinese Mainland. For the financial years ended 31 December 2019 and 2020, the Group reported revenues exceeding RMB477 billion and RMB507 billion respectively, profits exceeding RMB33 billion and RMB31 billion respectively, and total assets exceeding RMB2.2 trillion as at 31 December 2020.
- Following investigations and relevant enquiries, the AFRC found that there were numerous serious audit deficiencies by the Auditor3 in the Evergrande Audits, particularly the Evergrande Group Audits. These included misconduct that facilitated and contributed to management’s inflation of the Group’s reported profits and liquidity; failures to exercise professional scepticism despite elevated audit risks; a significant loss of audit independence; and the issuance of unmodified audit opinions despite not having obtained sufficient appropriate audit evidence (and, in some instances, despite knowing that such evidence was lacking). By issuing unmodified audit opinions, the Auditor allowed the Group’s material financial misstatements to go unchallenged, thereby enabling the presentation of a misleading and distorted financial position by the Group. The AFRC also identified substantial weaknesses in PwC’s governance and monitoring controls in respect of the Evergrande Group Audits.
In light of the above, the AFRC has:
- (i) issued a public reprimand to each of PwC, Cheung and Chow;
- (ii) imposed pecuniary penalties totalling HK$310,000,000, comprising a penalty of HK$300,000,000 on PwC and penalties of HK$5,000,000 each on Cheung and Chow;
- (iii) imposed an immediate practice limitation prohibiting PwC, for a period of six months, from accepting, performing, or issuing reports in respect of any PIE engagements for new clients4; and
- (iv) directed PwC to provide periodic updates and reports to the AFRC regarding its remedial actions for a period of twelve months (at intervals of no more than three months), and to arrange additional training to ensure that effective remedial measures are implemented to address the regulatory concerns identified by the AFRC in this matter.
The AFRC’s Key Findings
The AFRC identified multiple audit deficiencies across each of the Evergrande Audits. Among these, the audit deficiencies in the Evergrande Group Audits were particularly egregious. The Auditor’s deficiencies fall broadly into five key areas:
(i) Facilitating and contributing to management’s inflation of the Group’s reported profits and liquidity, by:
- Disregarding clear evidence of premature revenue recognition – i.e., the Auditor disregarded evidence from its own site visits showing that properties were still under construction – while accepting the Group’s records that properties were completed and ready for handover without verification and additional work; and
- Knowingly permitting unsupported consolidation adjustments i.e., unjustified accounting entries, to be recorded – even when the engagement team was aware of management’s intention to manipulate the Group’s financial results to achieve desired net profit targets.
(ii) Failing to exercise professional scepticism despite multiple red flags indicating elevated risks of material misstatements, and failing to design and perform appropriate procedures to obtain sufficient appropriate audit evidence across critical audit areas. These included revenue, properties under development, completed properties held for sale, restricted cash, going concern assessment and debts misclassified as equity.
(iii) Failing to maintain audit independence, including by:
- Allowing management to influence audit testing by permitting the swapping of samples for site visits that management did not wish to be inspected, and even requesting management to select its own site visit samples for audit testing; and
- Assuming management’s responsibility in preparing financial statements that formed the basis of the Group’s consolidated financial statements, notwithstanding that such responsibility rested with management. By doing so, the Auditor placed itself in a position where it would be auditing its own work.
(iv) Failing to comply with professional standards when performing audit work, with numerous deficiencies across multiple audit areas and procedures, including tests of controls, walkthrough procedures, and tests of details.
(v) Failing to properly monitor and evaluate the system of quality control of the relevant office of PwC’s network firm (Relevant Office).
These deficiencies ultimately enabled the Group to prematurely recognise revenue, inflate reported profits, as well as materially misstate its properties under development and completed properties held for sale, which were major assets reported at RMB1,327.5 billion and RMB1,406.4 billion representing 60% and 61% of the Group’s total assets for 2019 and 2020 respectively.
Mr Denis Cheng, Head of Investigation and Compliance, said, “The AFRC’s findings reflect serious auditor misconduct, particularly in facilitating manipulation, breaches of audit independence and failures to exercise professional scepticism, which are egregious and wholly unacceptable. Independence, objectivity and scepticism constitute a non-negotiable foundation of audit practice. These fundamental breaches fall dramatically below the standards expected of a leading firm in Hong Kong.”
As the group signing auditor, PwC bore ultimate responsibility for audit quality and was required to exercise effective governance and monitoring controls over audit work performed by the Relevant Office. In the Evergrande Group Audits, PwC relied heavily on the audit work performed by that office without properly monitoring or evaluating the design and operating effectiveness of its system of quality control. There were pervasive and systemic deficiencies in multiple areas of the system of quality control in the Relevant Office, including:
- (i) Insufficient focus on audit quality by partners: The partner performance evaluation framework for engagement partners at the Relevant Office placed disproportionate emphasis on client relationships, business development and revenue generation, with limited focus on audit quality. This reflects an improper prioritisation of commercial interests over audit quality at that office.
- (ii) Partners’ financial dependence on key client relationship: More than 80% of the engagement partner’s revenue was generated from engagements for the Group. Given that engagement finance was a major component of partner performance evaluation, this substantial financial dependence created a significant self-interest and/or intimidation threat. However, senior management neither assessed the extent of this dependence nor implemented effective safeguards to mitigate the resulting threats.
PwC’s failures to identify and address these and other quality control deficiencies in the Relevant Office materially impaired its ability to ensure audit quality in the Evergrande Group Audits.
In circumstances where the engagement team heavily relied on the work performed by the Relevant Office, Chow as the PwC South China and Hong Kong Assurance Leader and designated quality control system responsible person (QCSRP) of PwC at the time of the Evergrande Audits, had responsibility for understanding and evaluating the effectiveness of the system of quality control of that office. In this regard, the AFRC found that Chow breached his statutory obligations in that he failed to use his best endeavours to ensure that PwC established, and complied with, effective policies and procedures for monitoring the quality control system of the Relevant Office. In addition, Chow had failed to demonstrate professional competence and due care in performing his role as QCSRP.
The AFRC also found that Cheung, as the engagement quality control reviewer (EQCR), failed to adequately evaluate the engagement team’s significant judgments and conclusions in the Evergrande Group Audits and the Evergrande Vehicle Audit, despite being aware of significant risks of fraud in revenue recognition and management override of controls, as well as the significant risk relating to going concern assessment.
Ms Janey Lai, Chief Executive Officer of the AFRC, said, “This case highlights the need for robust quality management systems and effective oversight, especially for audit engagements involving cross-boundary arrangements. Audit quality is anchored in the tone at the top set by firm leadership, and reinforced through firm‑wide governance and supervision, to ensure that legitimate regulatory and market expectations placed on public interest entity auditors are translated into high-quality audit work at the engagement level.”
The AFRC’s Disciplinary Decision
The AFRC is satisfied that PwC, Cheung and Chow failed to discharge their professional responsibilities and did not meet the standard of care expected of a reasonably competent auditor, EQCR and QCSRP, respectively. Accordingly, the AFRC finds that each of PwC, Cheung and Chow had committed misconduct under the Accounting and Financial Reporting Council Ordinance (Cap. 588).
In deciding the appropriate disciplinary sanctions, the AFRC has considered all the relevant circumstances, including the nature, seriousness, duration, frequency and impact of the misconduct, as well as the relevant aggravating and mitigating factors. Among other things:
- The Auditor demonstrated a significant loss of independence and objectivity, and failed to exercise professional scepticism despite heightened fraud and management override risks. This misconduct strikes at the core of an independent audit and severely undermines the credibility of the auditor’s work.
- Significant deficiencies were also identified in PwC’s monitoring of the quality control system at the Relevant Office and PwC’s supervision of that office. The deficiencies identified in that office were systemic and pervasive, yet PwC failed to detect and address such deficiencies, reflecting weaknesses in its governance and monitoring control of its system of quality control.
- The Auditor’s misconduct in the Evergrande Audits allowed material misstatements in the consolidated financial statements over two financial years to go unchallenged, putting investors’ and stakeholders’ interests at risk, and significantly damaging public trust in the reliability of audited financial information and the integrity of the capital markets.
- Aggravating and mitigating factors: The AFRC took into account PwC’s prior disciplinary history with the Hong Kong Institute of Certified Public Accountants as an aggravating factor. The AFRC also took into account the remedial measures that PwC has already undertaken and continues to undertake following the incident, as well as the fact that Cheung and Chow each have a clean disciplinary record, as mitigating factors.
Ms Hester Leung, Head of Discipline, said, “This marks the first time the AFRC has imposed a practice limitation on a public interest entity auditor. The combination of hefty pecuniary penalties and a practice limitation is necessary and appropriate, given the serious and egregious audit failures, the substantial weaknesses in the audit firm’s governance and monitoring controls, and the profound and far-reaching impact on the public interest. Together, these sanctions send a clear message that serious departures from professional standards will not be tolerated and will be met with robust enforcement action.”
Dr David Sun, Chairman of the AFRC, said, “Strong ethics and high-quality audits are fundamental to the integrity of financial reporting and market confidence. While the issues identified in this case are serious, the AFRC remains confident in the credibility and capability of Hong Kong’s audit profession as a whole. The AFRC has taken note of PwC’s proactive remedial measures, and expects the firm to build on these efforts, demonstrating through its governance, leadership and conduct a sustained commitment to audit quality that meets the expectations placed on it as a leading firm.”
The AFRC expresses its deep appreciation for the unwavering support of the Supervision and Evaluation Bureau of the Ministry of Finance of the People’s Republic of China in this matter, which underscores the importance of strong cross-boundary cooperation in effective regulatory oversight and enforcement.
For details of the decision, please refer to the Statement of Disciplinary Action.
Notes:
- [1] PwC is registered as a firm and a public interest entity auditor with the AFRC (registration no. 0034).
- [2] Neither Cheung nor Chow is currently a registered responsible person of any registered PIE auditor.
- [3] In this document, the term “Auditor” refers to the engagement partner, the engagement team and/or PwC as the context requires, in line with their respective roles and responsibilities under the relevant law, regulations and auditing standards. The enforcement action against the engagement partner is still underway.
- [4] For the avoidance of doubt, during the limitation period, any reappointment to continue as auditor by an existing client and appointment as an auditor by an existing client newly listed in Hong Kong are not restricted by the practice limitation.
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