Hong Kong’s Securities and Futures Commission (SFC) has reached an agreement with PricewaterhouseCoopers Hong Kong (PwC HK) to pay HK$1 billion (US$128 million) in compensation to minority shareholders of China Evergrande Group, following what the regulator described as serious breaches of auditors’ professional duties.

In a statement on Thursday, the SFC said it had found that Evergrande’s annual reports and results announcements for 2019 and 2020 contained materially false or misleading information. The developer inflated revenue and profits by recognising income from property sales before projects had been completed and delivered to buyers.

Evergrande, now in liquidation, overstated its 2019 audited revenue by 44.79 per cent, or 213.9 billion yuan (US$31.34 billion), and its 2020 revenue by 69.03 per cent, or 350.2 billion yuan.

It had reported profits of 33.5 billion yuan in 2019 and 31.4 billion yuan in 2020, but these figures should have been losses of 7.12 billion yuan and 19.9 billion yuan, respectively.

“The SFC also examined the role of PwC HK and concluded that there was market misconduct arising from China Evergrande’s dissemination of false and misleading financial information, alongside serious breaches of auditors’ professional duties,” the regulator said.

Under the agreement, the case will be resolved without any admission of liability by PwC HK. The SFC said it would take no further action against the firm, provided it complied with the terms of the settlement.