In Evergrande's annual report issued this past spring, its auditor, PwC of Hong Kong, gave the company a clean bill of health, even though over the past year, the real estate conglomerate was offering deep discounts amid the COVID-19 pandemic to keep its sales growing, The Wall Street Journal reports.

Evergrande is the Chinese real estate giant that sent global markets tumbling on Monday. At one point, the Dow Jones 30 was down more than 700 points, although at the end of the day, the markets lost only about 600 points.

Investors and traders remain focused on the fate of Evergrande, as it is feared that its demise could end China's real estate boom of the past decade.

Evergrande -- which builds office towers, residential housing and stadiums throughout China -- has an immediate $88.5 billion debt burden and total liabilities of $300 billion.

Yesterday, Beijing told local governments to prepare for Evergrande's downfall, and today, there are reports of many real estate tycoons in China and Hong Kong unloading Evergrande stock and bonds at deep discounts.

The WSJ says that PwC failed to tell the investing public about a red flag that accountants call a "going concern warning" about a company's solvency prospects for the next 12 months. This was the key piece of information that was missing in Evergrande's 2020 financial statements, audited by PwC.

In addition, last year, Chinese authorities laid down "three red lines" to China's large real estate conglomerates warning them to pare down their debt.

While bond holders can honor a so-called grace period when redeeming their notes, the WSJ notes that roughly 42% of Evergrande's $88.5 billion in debt is due in less than a year. This does not include other liabilities weighing heavily on the company outside of interest-bearing debt, i.e. payments due to its suppliers and contractors. Nor does the figure include tax liabilities.

"The company averted a cash crunch last fall, and it has emphasized as recently as June that it had never missed a payment on its debt," according to the WSJ.