Case Details
Hengda Real Estate Group Company Limited (恒大地產集團有限公司), was the private real estate arm of China Evergrande Group (中國恒大集團) listed in Hong Kong. The Group had the highest debt among global developers, at CNY2.4tn on 30 June 2023. On 29 January 2024, the High Court of Hong Kong ordered the winding-up of the Group.
On 18 March 2024, the China Securities Regulatory Commission (CSRC) issued a fine of approximately CNY4.2bn to Hengda for engaging in fraudulent activities, and misleading investors during bond issuance. It also imposed a fine of CNY47m on the Group's chairman, Hui Ka-Yan (許家印). Hengda had inflated revenue by CNY213.9bn in FY2019 and CNY350bn in FY2020, resulting in inflated profits of CNY40.7bn in FY2019 and CNY51.3bn in FY2020.
PwC served as the auditors for the Group during FY2019, FY2020, and the first six months of 2021, and did not provide warnings on suspected fraud. How could Julia Leung, CEO of the Hong Kong’s securities regulator, Security and Futures Commission, regain the confidence of the investors on their supervisory roles?
1. To understand accounting methods in HKFRS and IFRS in recognizing revenue and cost of goods sold in real property sales.
2. To understand the rise and fall of the property development industry in mainland China, and its effects on financial performance.
3. To understand the auditors' responsibilities in detecting fraud and disclosing “going concern” to present a fair view of the financial statements.
4. To explore rights of creditors and shareholders of Hong Kong listed companies under bankruptcy, holding assets predominantly in mainland China.