Special topic: Chairman of Evergrande in China? PwC Emergency Response
PricewaterhouseCoopers Zhongtian Certified Public Accountants (special general partnership) (hereinafter referred to as "PricewaterhouseCoopers") responded to the anonymous letter event of "some partners of PricewaterhouseCoopers".
On April 16, PwC said that recently, we noticed that an anonymous letter calling itself "a part of PwC partners" was released and spread on some social platforms or media. The anonymous letter contains untrue information about PwC and some partners, and the relevant statements are obviously contrary to the facts, which seriously infringes the business reputation and legal rights of PwC and has caused adverse effects.
"PricewaterhouseCoopers attaches great importance to this matter, has taken countermeasures, and will conduct an in-depth investigation on this matter. PricewaterhouseCoopers has reported the release and dissemination of this letter to the relevant law enforcement authorities, and reserves the right to investigate the legal responsibility of those who fabricate, disseminate and disseminate false information." PricewaterhouseCoopers pointed out.
Recently, an anonymous letter titled "Who brought PwC into the fire pit of Evergrande?" and signed as "a part of PwC partners" spread in the market.
The letter mentioned the rumours of PwC infighting, among which the spearhead was Zhao Baiji, the chairman, chief partner and CEO of PwC in China. The anonymous letter said that the ultimate responsible person for the failure of PricewaterhouseCoopers' audit of Evergrande was Zhao Baiji.
On the whole, the anonymous letter mainly listed several aspects of Zhao Baiji's problems: first, the pursuit of high income for partners; second, audit quality management has become a means to suppress rivals; third, to avoid quality inspection by international network firms; fourth, management in the Asia Pacific region has been basically paralyzed; fifth, the independence of audit and whether to provide other services for Evergrande and Xu Jiayin's family office.
Among them, the anonymous letter said that Cho Pak Kee received an annual salary of HK $50 million from PricewaterhouseCoopers. PricewaterhouseCoopers has a core circle of Zhao Baiji, which is called "200 million club" internally. Less than 10 people get 200 million yuan from PricewaterhouseCoopers every year. The anonymous letter also mentioned that PricewaterhouseCoopers' service to Evergrande is not only about audit services. It is necessary to check whether it assists Evergrande and Xu Jiayin in tax evasion.
According to the latest information on the official website of PricewaterhouseCoopers on April 16, Zhao Baiji is currently the chairman of PricewaterhouseCoopers Asia Pacific and China, and is also one of the five core members of the global network leadership team of PricewaterhouseCoopers. The leadership team determines the overall strategy of the global network of PricewaterhouseCoopers and sets standards for all member institutions to follow. In 2015, Zhao Baiji was elected as the chairman of PwC China; In 2017, Zhao Baiji became the chairman of PwC Asia Pacific.
According to public data, China Evergrande has been the auditor of PricewaterhouseCoopers since its listing in Hong Kong in 2009, with a cooperation period of 14 years until January 2023. At the same time, for Evergrande's annual reports from 2009 to 2020, PwC has issued standard unqualified opinions.
Prior to this, PwC had been investigated twice by the Hong Kong Financial Reporting Bureau in October 2021 and August 2022. However, up to now, the Hong Kong Finance and Exchange Bureau has not disclosed the investigation results of PwC.
PricewaterhouseCoopers is one of the "four largest" accounting firms in the industry. According to the website of PricewaterhouseCoopers in China, the business of PricewaterhouseCoopers involves the fields of audit, consulting and tax. The network of member organizations covers 151 countries and regions, with more than 364000 employees.
On March 18, Evergrande Real Estate Group Co., Ltd. issued the Announcement on Receiving the Prior Notice of Administrative Penalty and Market Access Prohibition from the CSRC, and the CSRC planned to take lifelong measures to ban Xu Jiayin and Xia Haijun from entering the securities market, order Evergrande Real Estate to correct, give a warning and impose a fine of 4.175 billion yuan.
The announcement pointed out that the 2019 and 2020 annual reports disclosed by Evergrande Real Estate had false records of Evergrande Real Estate's financial fraud by way of revenue recognition in advance, resulting in a false increase of 213.989 billion yuan in revenue of Evergrande Real Estate in 2019, accounting for 50.14% of the current operating revenue, corresponding to a false increase of 173.267 billion yuan in costs, and a false increase of 40.722 billion yuan in profits, accounting for 63.31% of the total profits of the current period; In 2020, Evergrande Real Estate falsely increased its revenue by 350.157 billion yuan, accounting for 78.54% of the current operating revenue, corresponding to a falsely increased cost of 298.868 billion yuan, and falsely increased profits of 51.289 billion yuan, accounting for 86.88% of the total profits of the current period.
The announcement said that, in view of the illegal acts falsely recorded in Evergrande's 2019 annual report and 2020 annual report, Xu Jiayin, the then chairman of Evergrande Real Estate, comprehensively managed all businesses of Evergrande Real Estate, and encouraged other personnel to falsely increase the performance of Evergrande's annual report. The means were particularly bad and the circumstances were particularly serious. He was directly responsible for the executive, and organized Instruct to commit the above illegal acts. Xia Haijun, then Vice Chairman and President of the Board of Directors of China Evergrande Group (hereinafter referred to as "Evergrande Group"), actually managed the daily business affairs of Evergrande Real Estate as a whole, organized and arranged the preparation of false financial reports. The means were particularly bad and the circumstances were particularly serious, so he was directly in charge.
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