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US: PCAOB sanctions three China-based firms, imposes $7.9 million in total fines

Just Earth News | @justearthnews | 01 Dec 2023

US: PCAOB sanctions three China-based firms, imposes $7.9 million in total fines

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The Public Company Accounting Oversight Board of the USA has announced three settled disciplinary orders sanctioning three China-based firms and four individuals for violations of the U.S. securities laws and PCAOB rules and standards.

PCAOB announced two disciplinary orders imposing a total of $7 million in penalties against two registered public accounting firms within the PwC global network, Shanghai-based PricewaterhouseCoopers Zhong Tian, LLP(PDF) (“PwC China”) and Hong Kong-based PricewaterhouseCoopers (“PwC Hong Kong”)(PDF), for violating PCAOB quality control standards related to integrity and personnel management.

"A disciplinary order imposing immediate practice limitations (including prohibitions on accepting new PCAOB audit clients), an independent monitor to improve practices and ensure compliance, $940,000 in fines, and bars against individuals at Shandong Haoxin Certified Public Accountants Co., Ltd. (“Haoxin”)(PDF), a mainland China-based registered public accounting firm, and four of its associated persons for violations that include issuing a false audit report, failing to maintain independence from their issuer client, and improperly adopting the work of another accounting firm as their own," read the statement issued by PCAOB.

The PCAOB sanctioned PwC China and PwC Hong Kong for violating PCAOB quality control standards related to integrity and personnel management.

Both firms failed to detect or prevent extensive, improper answer sharing on tests for mandatory internal training courses.

"From 2018 until 2020, over 1,000 individuals from PwC Hong Kong, and hundreds of individuals from PwC China, engaged in improper answer sharing – by either providing or receiving access to answers through two unauthorized software applications – in connection with online tests for mandatory internal training courses related to the firms’ U.S. auditing curriculum," read the statement.

"The overwhelming majority of the professionals implicated in the answer sharing performed work for the firms’ Assurance practices," read the statement.

Without either firm admitting or denying the findings in the orders concerning the improper answer sharing, PwC Hong Kong was censured and agreed to pay a $4 million civil money penalty, and PwC China was censured and agreed to pay a $3 million civil money penalty. Both firms are required to review and improve their quality control policies and procedures to provide reasonable assurance that their personnel act with integrity in connection with internal training, and to report their compliance to the PCAOB within 150 days.

PCAOB enforcement staff members David Florenzo, Thomas McCann, and K. Lynn Dunston conducted the investigation. William Ryan and John Abell supervised these two matters.