SFC Reaches HK$1B Settlement with PwC over China Evergrande Audit Failures

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SFC reaches agreement with PricewaterhouseCoopers for shareholder compensation of HK$1 billion regarding false financial statements of China Evergrande Group for 2019 and 2020

23 Apr 2026

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.

End

Notes:

1. 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.
2. Section 277 of the SFO prohibits the disclosure of materially false or misleading information likely to induce investment decisions or materially affect securities prices.

Page last updated 23 Apr 2026