PricewaterhouseCoopers (PwC), the worldwide accounting giant that audited many developers prior to the sector's collapse, is under scrutiny by Chinese authorities in the wake of $78 billion fraud allegations against China Evergrande Group.

Hengda Real Estate Group, the primary onshore subsidiary of Evergrande, was accused this week by the China Securities Regulatory Commission of overstating its income for two years before Evergrande's default.

READ NEXT: China's Property Giant Evergrande and Its Founder Hui Ka Yan Accused of $78 Billion Fraud

Pressing Concerns Over PwC's Involvement in the Evergrande Fraud

People familiar with the situation told Bloomberg that Chinese authorities are now investigating PwC as part of their ongoing inquiries into Evergrande founder Hui Ka Yan. One source indicated that they are in touch with some of the former PwC accountants who oversaw Evergrande's audit.

According to the sources, the auditor's punishment has not been decided upon yet, and authorities are still looking into further charges against Hui, who was arrested in 2023.

PwC is already struggling to recover from scandals that have rocked other areas of its worldwide network, having let off employees in countries as diverse as Canada, Britain, and Australia. Therefore, the latest allegations of fraud at Evergrande come at a bad moment for the accounting firm.

"There are serious questions about PwC's role in the Evergrande fraud, specifically what it knew about the improper revenue recognition," said Nigel Stevenson of GMT Research, a Hong Kong-based accounting research business.

GMT earlier questioned Evergrande's financial statements and said in December 2023 that the company may have never been profitable. Evergrande called the research firm's study "without basis".

Despite Chinese authorities putting a lot of the responsibility on Evergrande's Hui, PwC might be in legal trouble, too. Several insolvency practitioners and attorneys have speculated that the PwC would be targeted by the liquidators attempting to recoup funds owed to Evergrande's creditors in the ongoing liquidation proceedings in Hong Kong.

Evergrande had PwC as its auditor for almost a decade until the worldwide accounting firm withdrew in January 2023 over what the developer said were issues about the audit.

READ MORE: China's Evergrande Facing Liquidation as It Grapples With $300 Billion Debt