HONG KONG (Reuters) -Lawyers appointed by the liquidators of China Evergrande Group ( EGRNF ) are investigating some of the property developer's service providers including its former auditor PricewaterhouseCoopers, to potentially recoup losses for creditors, three sources said.

Evergrande, once China's largest property developer, was ordered to be liquidated by a Hong Kong court in January, after it failed to deliver a concrete restructuring plan for its $23 billion worth of offshore debt deemed to be in default.

As part of the liquidation process, Hong Kong-based law firm Karas So is working with the two court-appointed Evergrande liquidators, Tiffany Wong and Eddie Middleton from Alvarez and Marsal (A&M), said the three sources, who have knowledge of the matter.

The move, which is common in liquidation cases, indicates initial steps being taken towards liquidation of the world's most indebted property developer with more than $300 billion of total liabilities.

The two liquidators, Evergrande, and Karas So declined to comment. PwC also declined to comment.

Evergrande's liquidation could take more than a decade to be completed, according to some offshore investors, and become a blueprint for future major Chinese corporate winding up processes.

Reuters reported in March, citing sources, that lawyers working on Evergrande's liquidation will look for evidence of wrongdoing and negligence across the company, its management and external advisers that could have led to it defaulting on its debt.

Karas So, which specialized in liquidation-related legal matters, is looking into Evergrande's insolvency and whether some service providers to the embattled property developer played a role in the rapid fall in its financial profile.

Apart from PwC, Karas So has also been examining the roles played by other institutions that provided financial and other services to Evergrande, said one of the sources.

All the sources declined to be named as they were not authorised to speak to the media.

It is not clear when Karas So and A&M will take actions, if any, after the completion of the investigation.

PwC has been in the spotlight in China since the China Securities Regulatory Commission earlier this year found Evergrande had overstated revenue at its main unit Hengda by 564 billion yuan ($78 billion) over two years through 2020.

The auditor is facing a record fine of at least 1 billion yuan and a halt to operations at some of its mainland China offices, Bloomberg reported in late May, as a result of those regulatory findings.

Hong Kong's audit watchdog has also been probing Evergrande and PwC since 2021 over the developer's financial accounts. It initiated another probe against PwC in April after a whistle blower letter alleging auditing deficiencies became public.

If legal claims are filed against PwC or other service providers, Evergrande's liquidation might set an example for other liquidators that are likely to move towards recovering financial losses for creditors, said industry insiders.

At least five Chinese developers have been ordered by the Hong Kong court to be liquidated since the property debt crisis in the world's second-largest economy unfolded in 2021, while liquidation court proceedings are going on against a few others

($1 = 7.2549 Chinese yuan renminbi)