Since the outbreak of Evergrande's financial fraud case, the punishment of its "royal" audit agency, PricewaterhouseCoopers, has been pending.
A few days ago, an open letter entitled "Who brought PwC into the fire pit of Evergrande?" made PwC the focus again!
Before the supervision arrived, the infighting started first, and the "internal partners" collectively broke the news, word by word, and even directly pointed out the ultimate responsible person for the failure of PwC's audit of Evergrande.
5 pages of small PDF essay that completely rips off the fig leaf of PwC?!
01
The open letter document was dated in March, and the author, who was anonymous as a "part of PwC partners", mainly talked about who should be held accountable for PwC's audit of Evergrande.
The content is excerpted from the Internet and has not been confirmed
At the beginning of the long article, the spearhead was pointed at the key figure "Zhao Baiji".
Source: PwC official website
According to PwC's website, Patrick is the Chairman of Asia Pacific and China, and one of the five core members of the PwC Global Network Leadership Team, which determines the overall strategy of the PwC Global Network and sets common standards for member institutions. A proper behind-the-scenes boss!
The article summarizes several key points why PwC jumped into the Evergrande fire pit:
1. Today's PricewaterhouseCoopers is dominated by Arthur Andersen's gang back then, headed by "Zhao Baiji", who internally pursues high income as a partner, with a salary of up to 50 million Hong Kong dollars;
2. There is a 200 million club within PwC that ordinary people can't enter, and the author of the open letter suggested that the assets of these people should be frozen to repay the losses caused by the Evergrande incident to the public;
3. PwC's management is chaotic, evading the quality inspection of international network firms, the level of audit quality is rotten, and the Asia-Pacific region is basically paralyzed;
4. In 2014, the previous generation of PwC leaders raised a question to dismiss Evergrande, but was stopped by Zhao Baiji;
5. PwC is good on the whole, and a small number of bad elements have ruined PwC's reputation, and these people should be investigated and punished.
02
In this era of rampant rumors, the credibility of small essays is getting lower and lower, but you can still dig up a lot of amazing insiders from it!
First: The open letter mentions that the forces led by Zhao Baiji come from Arthur Andersen, and people in the audit industry must be trembling when they mention Arthur Andersen.
In 2001, Enron, the largest energy company in the United States at the time, declared bankruptcy, and before the bankruptcy, Arthur Andersen, one of the world's five largest accounting firms, admitted to helping Enron make false accounts, and was convicted of obstruction of justice and compensated investors $7.14 billion.
Arthur Andersen's 89-year audit business came to an end, and since then, the pattern of the world's five largest accounting firms has changed dramatically, and the "Big Five" have been directly eliminated to become the "Big Four". Arthur Andersen once said, "Even if you pour the wealth of the whole city of Chicago, it will be difficult to induce me to give in." ”
It stands to reason that after the collapse of Arthur Andersen, there should be only legends left on the rivers and lakes.
However, as stated in the open letter, Arthur Andersen did not die, but completely passed on in another form, hiding in the corner for so many years to silently manipulate everything and control the overall situation?
This reminds me of a little-known detail, shortly after Arthur Andersen's collapse, an announcement was issued from Arthur Andersen's official website, which was rather ironic: Arthur Andersen Hong Kong and Arthur Andersen Chinese mainland joined PwC with immediate effect and operated under the name of PwC. Everything may have been confirmed here.
Second, the open letter twice mentioned PwC's internal opposition to Evergrande, but it was stopped or "resolved".
Why did Zhao Baiji stop the person who asked the question?
Evergrande and PwC have been cooperating for 14 years. From 2009 to 2020, PwC has been the auditor of China Evergrande, and PwC takes tens of millions of dollars in fees from Evergrande every year, with a cumulative audit fee of 276 million yuan. If you add Evergrande Property and Evergrande Automobile, the amount will only be more.
In January 2023, Pak Seng replaced PricewaterhouseCoopers as the new auditor, unveiling the black box of Evergrande's financial crisis.
In fact, in the matter of Evergrande's thunderstorm, the first whistleblower was not Shanghui Baicheng, but the citron of the short-selling institution. As early as June 2012, Citron founder Andrew Lefort released a 57-page report accusing Evergrande of fraud, listing to investors Evergrande's "five deadly sins" and the seven major crises facing Evergrande.
How did Citron find out that Evergrande had a problem? It's also ironic, it's just public information.
Citron found that the growth rate of Evergrande's asset scale was abnormal: almost five times that of its mainland counterparts.
It is also based on this 5 times the data to conduct reasonable logical reasoning, layer by layer analysis, and conclude that Evergrande is in fact insolvent, its founder has lost his morality, and there are major problems in the business model.
These accusations have since proven to be unfounded. But Citron ended badly, and was sentenced to spread false information to short Evergrande and lost the lawsuit.
Can't the well-known PwC see this? The other party is falsifying, and is still "shouting and cheering" on the side, and perhaps when the benefits far outweigh the risks, everything that should be seen will be invisible.
On March 18, 2024, due to financial fraud, particularly bad means, and particularly serious circumstances, Xu Jiayin and Xia Haijun were sentenced to a lifetime ban from the securities market, fined 47 million and 15 million respectively, and Evergrande Real Estate was fined 4.175 billion yuan.
In terms of the operation process of financial fraud, the financial treatment is mainly carried out through the inflated income of Evergrande Real Estate, with the inflated amount of 564.146 billion yuan and the inflated profit of 92.011 billion yuan, which has already surpassed Enron in terms of amount and impact.
The audit is the most important part of all processes, and the recognition of revenue occurrence and cut-off is also an essential part of the audit process.
Source: Evergrande announcement
What is more noteworthy is that PwC has issued unqualified audit reports for ten consecutive years, which is almost the highest level of assurance in the audit field in the industry, and to some extent, it is precisely because PwC has issued unqualified audit reports to endorse Evergrande's credibility that Evergrande can continue to issue bonds and borrow from banks.
After the Evergrande explosion, overseas investors and creditors launched a condemnation against PwC, and PwC was investigated. If Evergrande's liquidators do succeed in suing, it will be one of the world's most significant litigation cases against the Big Four accounting firms.
Should PwC be held responsible? The country is so big and the matter is so huge, there are always omissions in the legislative regulations.
The core of the determination of the responsibilities of capital market intermediaries is generally whether they are diligent and conscientious. However, the criteria for diligence and diligence in an audit are complex and remain inconclusive.
03
PwC's dereliction of duty on the Evergrande issue has made people question the professionalism and independence of the "Big Four".
However, PwC's crisis of confidence goes far beyond that.
The letter mentions that the level of audit quality at PwC China is: rotten to the point of being so bad.
Coincidentally, in December 2023, Huichen shares, the "first share of data analysis" on the Science and Technology Innovation Board, were exposed to financial fraud for five consecutive years, and the long-term hired auditor was PricewaterhouseCoopers.
At the end of November 2023, the U.S. Public Company Accounting Oversight Board (PCAOB) fined PwC China, PwC Hong Kong and a Chinese audit firm US$7.94 million for cheating on more than 1,000 people in internal training exams and violating audit quality management standards.
There are not a few cases like this abroad.
In mid-2023, PwC Australia was forced to dismiss nine partners and 366 employees after being accused of misusing confidential information to market its tax avoidance services around the world.
In 2018, PwC was awarded RMB 4.1 billion in damages for negligence in the audit process for large-scale fraud and fraud committed by a key client of Colonial Bank in Alabama.
In 2015, Tesco, the UK's largest retailer, was caught in an accounting scandal and was investigated, terminating its 32-year partnership with PricewaterhouseCoopers.
In addition, according to the "Jinshi Miscellaneous", the four major audits are not good in the A-share mix, the project market share is shrinking day by day, and the number of PwC audits has remained between 1% and 2% all year round, and the proportion of audits in 2023 will directly fall below 1%, and it is still facing an existential crisis.
04
Millions of owners are powerless to wail in the face of the dilemma of unfinished real estate;
Those who bought Evergrande bonds and stocks are waiting for the distant repayment and the collapse to destroy the three views;
The people who do business in partnership with Evergrande are dragged down alive.
Accounting firms, as the "gatekeepers of the capital market", are naturally to blame, but it is even more difficult to touch the cake of vested interests than to touch the soul, and the price often needs to be paid by ordinary people who do not know why.
This world may be a huge grass platform, and the first step for adults to avoid falling is to disenchant the so-called authority.
As for the reason for this open letter, perhaps it is to expose internal evils and summarize the "bloody lesson"; perhaps, after all, the firm is a partnership, and the problem of factional struggle has not been solved for more than 20 years, and the drama of fighting for power and profit is endless, and it is normal to fly separately when disaster strikes.
As of press time, PwC finally replied, issuing a solemn statement, saying that the anonymous letter contained false information about PwC and some of its partners, and that it had been reported.
However, there is no explanation as to which specific information in the letter contradicts the facts, and wait for PwC's detailed explanation and ending!