| PwC | | 27-Jan-25 | | The Board resolved to propose the removal of PwC and PwC ZT as auditors of the Company, an action which, in the view of the Board (including the audit committee of the Board (the “Audit Committee”)), is in the best interests of the shareholders (“Shareholders”) of the Company as a whole. The PwC Letter and the PwC ZT Letter On January 21, 2025, the Audit Committee received a letter of the same date from PwC (the “PwC Letter”). In the letter, PwC stated that it was orally notified of its removal as the Company’s auditor on January 16, 2025. In the same letter, PwC also stated, among other matters, that (1) on October 25, 2024, it received information in the course of an oral conversation (the “Subject Conversation”) with a then-current senior executive (the “Executive”) of the Company that raised concerns, in the view of PwC, about certain possible related party transactions of the Company (the “Subject Transactions”); (2) on November 25, 2024, PwC orally reported the Subject Conversation to the Audit Committee; (3) on December 11, 2024, PwC issued a written letter to the Audit Committee requesting an expert and independent investigation into the matter; and (4) whilst PwC noted that the Audit Committee engaged forensic accountants and independent investigation counsel to investigate the Subject Transactions and other related matters (the “Independent Investigation”), and that the Executive, in the interview with the team conducting the Independent Investigation, denied the contents of the Subject Conversation as reported by PwC to the Audit Committee, PwC raised questions about the investigation, the independence of the Audit Committee, and the Company’s remedial actions. On January 21, 2025, the Audit Committee also received a letter of the same date from PwC ZT (the “PwC ZT Letter”), the Company’s U.S. PCAOB-registered auditor. In the letter, PwC ZT states that, due to the seriousness of the Subject Conversation as understood by PwC ZT, the Audit Committee’s decision not to share its Independent Investigation conclusions with PwC ZT, and certain independence concerns, it cannot consent to the incorporation of its prior audit or review opinions in any current or future Company filings and further states that neither the Company nor any successor auditor can rely on any work that PwC ZT performed for the Company with regard to 2024, and, as PwC ZT was no longer able to rely on representations provided by the Company and its management in connection with the Company’s fiscal year 2022 and 2023 audits, its 2022 and 2023 audit opinions on the Company’s annual financial statements should no longer be relied upon. The Company’s Position As of the date of the PwC Letter and the PwC ZT Letter, the Company had not removed or resolved to remove PwC and PwC ZT as the auditors of the Company. Furthermore, the Independent Investigation into the Subject Transactions and related matters was and still is ongoing. The Company will disclose the key findings upon the substantial completion of the Independent Investigation as well as the Company’s further actions, if any, on matters relating to the Subject Transactions. The Board resolved to propose the removal of PwC (including PwC ZT) as the Company’s auditors at this time because the Board (including the Audit Committee) has lost its confidence in PwC and PwC ZT. First, in the Audit Committee’s view, PwC was less than candid with the Audit Committee in explaining how and when its alleged concerns about the Subject Transactions first surfaced. The information that PwC provided to the Audit Committee was inconsistent and contradictory in some instances and demonstrably and materially wrong in others. Second, PwC did not report the Subject Conversation or the Subject Transactions to the Audit Committee expeditiously, allowing multiple weeks to pass with no action on PwC’s part and unreasonably limiting the Audit Committee’s access to information that would have enabled the Audit Committee to take timelier action. After PwC did finally report the Subject Conversation and the Subject Transactions to the Audit Committee, PwC, on multiple occasions, delayed or postponed meetings with the Company that the Company proposed to investigate the issues, leading to additional loss of time that further put at risk the Company’s ability to complete its audit and meet its financial reporting obligations in a timely manner. Finally, PwC, despite the Audit Committee’s request, failed to provide any information to the Audit Committee to enable the Audit Committee to ascertain whether PwC ZT is authorized by the relevant Chinese regulatory authorities to conduct audit work for the Company for the current audit period (fiscal year ended 31 December 2024). In particular, the Audit Committee is concerned about the publicly reported administrative penalties that the Chinese Ministry of Finance imposed on PwC ZT in September 2024 in connection with PwC ZT’s audit work for Evergrande, including, but not limited to, the suspension of PwC ZT’s operations for six months (“Evergrande Penalties”) – a period that covers the Company’s current audit period. For the foregoing reasons, PwC (including PwC ZT) had been asked, on multiple occasions, to tender its resignation and also to respond to the Audit Committee’s concerns as summarized above. However, as of the date of the PwC Letter and PwC ZT Letter, PwC and PwC ZT failed to address any of the Audit Committee’s concerns about PwC’s own conduct and the implications of the Evergrande Penalties on PwC ZT’s qualifications to carry out audit work in Chinese mainland. |
