This paper examines the Evergrande debt crisis and PwC’s audit failure to explore how excessive leverage, tightened regulation, poor cash flow management, and governance deficiencies combined to trigger systemic risks. The study traces the progression of Evergrande’s crisis since the introduction of the “three red lines” policy, from liquidity shortages and debt defaults to large-scale homebuyer protests, highlighting the fragile financing model and complex debt structure underlying the crisis. It also analyzes PwC’s audit failures in Evergrande’s financial fraud, the penalties imposed, and compares them with international cases to reveal the profound consequences of weakened audit independence and internal governance imbalances. Based on these findings, the paper proposes preventive strategies: real estate firms should optimize capital structures, strengthen cash flow management, improve governance transparency, and enhance policy adaptability; accounting firms should establish mechanisms to safeguard audit independence, form specialized industry audit teams, and improve internal risk control and quality management. The conclusions provide practical insights not only for preventing debt risks in real estate enterprises but also for promoting standardized and sustainable development of the auditing profession.

Xiaoyu Li. Governance of Accounting Firms and Risk Management Strategies for Large Real-Estate Companies. Academic Journal of Business & Management (2025), Vol. 7, Issue 9: 78-86. https://doi.org/10.25236/AJBM.2025.070912.

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