The Financial Reporting Council (FRC), Hong Kong’s audit regulator has started an enquiry into the financial statements of China Evergrande Group’s property services arm and its former auditor PwC. This follows Evergrande’s probe that raised questions about seized deposits worth $2bn of the property services unit. FRC was investigating the financial statements of 2020 and 1H 2021 and the audit conducted by PwC for 2020 accounts. It identified questions about the classification of restricted bank deposits and other loans, the measurement of pledge guarantees given and the disclosure of related party transactions in the accounts, and related questions about the audits. In July, China Evergrande’s CEO, Xia Haijun, and CFO Pan Darong resigned as a preliminary probe found their involvement in using RMB 13.4bn ($1.99bn) of deposits as collateral for third parties to obtain bank loans, which some borrowers failed to repay.
Evergrande’s bonds are currently trading at distressed levels of around 4-7 cents to the dollar.
For the full story, click here
