Evergrande says PwC resigns after 2021 audit disagreements

CHINA Evergrande Group said PwC resigned as its auditor on Monday, adding to the pressure on the developer at the epicenter of China’s property crisis.

Evergrande’s board recommended the resignation of PwC after the two firms couldn’t “agree on the timetable and the scope of work in respect of the assessment on the group’s going concern basis,” as well as the “procedures required for the assets impairment assessment,” according to a regulatory filing.

In its Jan 16 resignation letter to Evergrande’s audit committee and board, PwC noted it still hadn’t received information relating to “significant matters” of the 2021 audit. That included cash flow forecasts, the net realizable value of the group’s properties under development and even the consolidated financial statements of the group, the filing said.

The lack of information meant PwC was “unable to determine the scope of any necessary additional audit work and is also not in a position to provide a reasonable estimate of the time required to complete the audit for the year 2021,” according to the auditor.

The delayed audit of Evergrande’s 2021 financial statements is hindering Evergrande’s attempts to restructure its debts, according to the statement. As such the company’s board decided to appoint another auditor in an attempt to “complete the audit work as soon as practicable.”

Defining Default

Evergrande defaulted more than a year ago and its efforts to reach a solution with creditors is under close scrutiny with various deadlines having been missed. The company’s debt overhaul would be one of China’s biggest ever and carry broader implications for the country’s US$58 trillion financial system.

Evergrande’s board has resolved to appoint Prism Hong Kong and Shanghai Ltd as the interim auditor until the conclusion of the next AGM of the company, according to the statement.

A spokesperson for PwC declined to comment. Representatives for Evergrande and Prism didn’t immediately respond to a request for comment outside of normal office hours. – BLOOMBERG