Hong Kong regulator sanctions PwC and partners

Core Viewpoint - The Accounting and Financial Reporting Council (AFRC) of Hong Kong has disciplined PricewaterhouseCoopers (PwC) and two individuals for audit deficiencies related to Dynasty Fine Wines Group's financial audits for 2010 and 2011 [1][3]. Summary by Sections Disciplinary Actions - The AFRC issued reprimands and imposed fines totaling HK$1.6 million ($205.8k) on PwC, Cheng Kwong On (engagement partner), and Kong Ling Yin, Raymond (engagement quality control reviewer) [2]. Audit Deficiencies - PwC's audit work on revenue recognition was found deficient, lacking adequate evidence for the group's revenue records, leading to an incorrect unmodified audit opinion [3][4]. Concerns in Revenue Recognition - The AFRC highlighted that revenue recognition is a recurring concern, often due to poor audit planning, inadequate risk assessment, and deficiencies in audit procedures [4][5]. Allegations and Internal Investigation - Allegations in 2012 suggested that Dynasty Fine Wines Group's reported revenues were overstated, with many sales being fictitious. An internal investigation confirmed that a large volume of wine products sold to a distributor had not been delivered [5][6]. Financial Statement Adjustments - Following the investigation, the company adjusted its financial statements for 2010 and 2011, revealing a loss in 2011 instead of the previously reported profit, along with a substantial reduction in retained earnings for both years [6][7]. Auditor Reliance and Improvements - Auditors relied on the group's internal sales documents without verifying actual delivery. The AFRC noted no evidence of intentional misconduct. PwC has since enhanced its financial systems by adopting Oracle Fusion Cloud ERP [7].