RECENTLY PricewaterhouseCoopers LLP has resigned as auditor for Country Garden Holdings Co, a developer facing difficulties, as both entities struggle to stay operational in China.
Among the Big Four accounting firms, PwC has been frequently used by Chinese real estate companies listed in Hong Kong, as noted by Bloomberg data.
This year, more than 30 publicly listed mainland Chinese firms, including major state-owned entities like Bank of China Ltd and PetroChina Co, have switched away from PwC as their auditor.
In its resignation letter, PwC indicated it was awaiting critical documents from Country Garden, including a cash flow forecast, to evaluate the developer’s liquidity.
Country Garden announced that PwC could not meet the deadlines for the company’s overdue 2023 financial statements.
Instead, PwC will be replaced by Hong Kong-based Zhonghui Anda CPA, according to a recent filing.
PwC is also facing a potential six-month suspension due to its role in auditing the failed China Evergrande Group, as reported by a source in August.
If imposed, this ban could prevent PwC China from approving financial results and restructurings, based on precedents. PwC declined to comment on the matter.
Country Garden is currently dealing with a liquidation petition in a Hong Kong court and has delayed the release of its first-half and 2023 full-year financial results to gather the necessary information.
The company is pursuing a comprehensive restructuring of both its dollar and yuan debt.
According to Pingyang Gao, an accounting and law professor at HKU Business School, auditor resignations often occur when there are significant expectation gaps between the auditor and the client.
He suggested that Country Garden’s delayed financial statements might ultimately surprise the market, similar to the situation with China Evergrande. – Sept 6, 2024
Main image: nyt.com
