The Public Firm Accounting Oversight Board imposed financial penalties and different sanctions Tuesday in opposition to two accounting corporations within the U.S. that had been working with unregistered auditing corporations in China.
The circumstances had been known as separate, unrelated issues, however the sanctions had been introduced concurrently. They concerned WWC PC, a agency in San Mateo, California, that’s headquartered in Hong Kong, and JLKZ CPA LLP, a agency headquartered in Flushing, New York, that labored with SBA Stone Forest CPA Co. Ltd., a agency in Shanghai, China. A supervisor at WWC declined to touch upon the case and JLKZ CPA didn’t instantly reply to a request for remark.
Each issues concerned violations of the Sarbanes-Oxley Act and PCAOB guidelines and requirements in reference to using unregistered accounting corporations in conducting issuer audits.
“To guard traders, the PCAOB has clear and necessary guidelines that require accounting corporations to register with the board earlier than enjoying a considerable position in audits of public corporations,” mentioned PCAOB chair Erica Williams in an announcement Tuesday. “When corporations that challenge audit stories fail to make sure that their use and supervision of unregistered accounting corporations complies with the legislation, we’ll maintain them accountable.”
The circumstances come at a time when the PCAOB has been engaged in talks with Chinese language authorities to resolve a years-long standoff over giving the PCAOB entry to examine auditing corporations in China. In 2020, Congress handed the Holding Overseas Firms Accountable Act, which bars corporations from being traded on U.S. markets if their auditing corporations can’t be inspected by the PCAOB for 3 years in a row. The SEC introduced plans to delist a number of Chinese language corporations, prompting Chinese language securities authorities to announce final month they had been making constructive progress on their negotiations with the PCAOB, however the PCAOB mentioned the hypothesis on an settlement was “untimely,” insisting that it’s allowed to examine audit work papers (see story).
The PCAOB mentioned the WWC matter is the primary by which the board has imposed sanctions for a failure to fairly supervise an unregistered agency. WWC used audit work carried out by its unregistered Hong Kong affiliate in 10 issuer audits however did not fairly supervise the affiliate, in response to the PCAOB. The board censured WWC, imposed a $50,000 civil cash penalty, and ordered the agency to take steps to enhance its high quality management insurance policies and procedures.
The JLKZ matter is the primary by which the PCAOB mentioned it has imposed sanctions in opposition to a agency for issuing an audit report the place a separate, unregistered agency had carried out the underlying audit.
Below an association with the unregistered Chinese language agency, JLKZ issued audit stories for 2 issuers after workers on the Chinese language agency acted because the engagement accomplice, audit employees, and engagement high quality reviewer for the audits. A lot of the audit charges went to the unregistered Chinese language agency. The PCAOB discovered that JLKZ violated PCAOB requirements by issuing audit stories the place it had not carried out the underlying audits. It additionally discovered that JLKZ managing accomplice Jimmy P. Lee immediately and considerably contributed to the agency’s violations.
The PCAOB imposed a complete penalty of $50,000 on JLKZ and Lee, censured them, and restricted for 2 years JLKZ’s capacity to just accept new issuer or broker-dealer audit engagements.
