Bad news continues to escalate as Chinese property sector encounters a stream of defaults. The companies are facing this negative trend as the international auditors are dropping. The first auditor swap began in the China Evergrande Group default last year. This is following the public default across many property sectors in China. Defaults happen following the auditor pressures and delay on reports. Companies made announcements that auditors are resigning. This is because they are unable to finish reviews during the given time.
PwC also reports that they decided to quit auditioning in most of the Chinese property companies.
Mostly they resigned from Jingrui Holdings after they could not attain the timeline to complete the audit. Around a week later, Jingrui disclosed the missed interest payments. The total was around $57m in the four dollar bonds. However, PwC refused to give further comment. An analyst argued that it would be difficult for developers to issue without the help from the auditors. However, he added that many of the companies do not have any interest in entering the U.S. dollar bond market.
Although the primary market closed the property issuance, they encountered delays in hiring auditors. This becomes the reason why they also delay their earning reports. As a result they encountered damaged transparency. A senior vice president at Moody, Kaven Tsang, argued that this kind of situation is very concerning. He added that the auditor shift on normal days is strange. According to him, understanding the situation and managing negative implications lie in the way the frequency changes.
So far, it is still uncertain how the company would handle auditor swaps especially for the new audits. Worse, some auditors were not active in the property sector previously. This becomes the reason why the property sector in China might face significant challenge in speeding up.
