Hong Kong’s accounting watchdog will investigate PwC for alleged auditing fraud related to bankrupt Chinese developer China Evergrande Group, vowing enforcement action.

Accounting firm vows investigation, possible legal action against creators of ‘fabricated’ letter circulating on social media, which names partners it claims were involved in ‘auditing failure’ tied to the indebted developer.

Tuhu Car, a Chinese car maintenance and repair company listed in Hong Kong, said it expects its financial results for 2023 to reflect a turnaround in its business as a post-pandemic rebound in domestic travel boosted demand for its services.

The Accounting and Financial Reporting Council has handled a substantially higher volume of complaints and investigations over the past five years since it gained more power, its chairman says.

The global minimum tax regime to be implemented in Hong Kong in 2025 means the city can no longer offer tax incentives to big companies, but the entrepot will attract talent and businesses because of a low salary tax rate which will maintain strong capital markets.

Hong Kong’s decision to implement the 15 per cent global minimum tax for large multinational companies from 2025 could undermine the city’s efforts to offer tax incentives to attract new businesses, says Robert Lee, who is also a broker.

PwC’s affiliates in China and Hong Kong, and Shandong Haoxin, have agreed to pay a combined fine of nearly US$8 million for auditing failures related to US-listed Chinese companies, the PCAOB said.

Rules restricting the location of working papers and data mean accounting firms will have to up their game to comply, experts say, while calling into question the role of Hong Kong and the ‘big four’ global accounting firms.

The study of 1,882 companies listed in Hong Kong found that 141 of them had opted for external assurance – essentially an audit of their environmental, social and governance reporting – this year, up from only 85 in 2021.

The new rules, which will take effect on January 1, mark Beijing’s latest initiative to advance the development of the nation’s digital economy.

The Hong Kong Association of Registered Public Interest Entity Auditors said that one in every three accounting firms currently lacks 20 per cent of the needed manpower, and more than half are actively recruiting.

Internet advertising and video games will be the main growth drivers as China’s entertainment and media industry grows faster than the global average over the next five years, consulting firm says.

As the global trend favours mandatory audits, companies should seek assurance now for the most material information, says EY’s climate and sustainability partner.

Hong Kong’s small accounting firms are ‘compromising audit quality’ by cutting corners and failing to learn from past mistakes, potentially eroding public trust in the city as an international financial centre, according to a senior regulator.

The demand for accounting professionals in mainland China has been steadily rising over the past few years, and is only expected to increase with the development of the Greater Bay Area, say industry experts.

The combined GDP of the 11 cities in the Greater Bay Area was close to US$2 trillion in 2022, up 25 per cent from US$1.65 trillion in 2019, Hong Kong’s finance chief says.

PCAOB said it found significant deficiencies in first review of audits of mainland Chinese firms listed in the US, although issues are not expected to affect status of firms listed there.

The plan, codenamed Project Everest, faced resistance from the US affiliate, but the firm’s top leaders said they are still committed to creating two world-class organisations.

While Big Four firms have local affiliates serving mainland clients, Hong Kong SMEs prefer to be served by smaller accounting firms, said Edmund Wong Chun-sek.

Deloitte Hua Yong has been fined 212 million yuan (US$31 million) for failures in audit work conducted at China Huarong Asset Management, China’s ministry of finance says.

Executives of the Public Company Accounting Oversight Board will hold “preparatory meetings” with the two accounting giants ahead of inspections later in the year as they seek to assess their auditing of Chinese companies listed in the US, say people familiar with the matter.

The crisis-ridden Adani Group is moving an investor roadshow to Hong Kong on Tuesday, continuing its charm offensive to ease concerns about its financial health and corporate governance induced by a short-seller’s allegations.

The cash-strapped Chinese developer said its Hong Kong-listed shares could resume trading in March after almost a year of suspension prompted by the company’s failure to publish its 2021 accounts on time.

China welcomed an overnight report by US regulators that said they were able to review the audit documents of Chinese companies trading on American exchanges, putting to rest a major dispute that had put the likes of Alibaba Group Holding and Baidu on the verge of delisting.

For the first time in China’s history, Beijing allowed audit records to be taken outside the mainland for inspection, thus removing the risk of delisting hanging over some 170 US-listed Chinese firms.

A landmark review of audits of 168 companies that face possible delisting from US exchanges is coming to an end, with a report expected as soon as year’s end, sources say.