(Bloomberg) -- PricewaterhouseCoopers LLP resigned as auditor for defaulted developer Country Garden Holdings Co., as both firms navigate challenges to keep operations afloat in China.
The real estate company said PwC is unable to fulfill the timetable requirements for the company’s need to publish its overdue financial statements for 2023. PwC will be replaced by Hong Kong-based Zhonghui Anda CPA, according to a filing.
PwC is facing a six-month ban as part of punishment over its role in auditing failed developer China Evergrande Group, a person familiar said in August. If the penalty is handed down, it’s expected to stop PwC China from signing off on financial results and restructurings, based on previous cases. The company declined to comment.
Country Garden meanwhile is fending off a liquidation petition in a Hong Kong court. The company has delayed announcing its first-half and 2023 full-year results because it needs more time to collect information, it said in an exchange filing in late August. The company is seeking a holistic restructuring of both its dollar and yuan debt.
PwC said in its resignation letter that it was waiting for Country Garden to provide outstanding documents, including the cash flow forecast, in order to assess the developer’s liquidity position.
Resignation often happens when an auditor and its client have significant expectation gaps, said Pingyang Gao, an accounting and law professor at HKU Business School.
“The long overdue audited financial statements of country garden may eventually surprise the market in the big way, like China Evergrande,” Gao said.
Among the Big Four accounting firms, PwC was one of the most commonly used by Chinese real estate firms listed in Hong Kong, according to data compiled by Bloomberg. More than 30 publicly listed firms based in mainland China, including state-owned giants Bank of China Ltd. and PetroChina Co., have dropped PwC as their auditor this year.
(Updates with analyst quote in seventh paragraph.)
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