TheCorporateCounsel.net

Yesterday, the PCAOB announced three settled disciplinary orders relating to China-based audit firms & individuals involved with auditing US-listed companies. These are the PCAOB’s first enforcement settlements under the protocol established last year that finally granted the Board’s longstanding demand to inspect & investigate registered public accounting firms headquartered in mainland China and Hong Kong.

Three firms & four individuals were fined a total of $7.9 million for alleged training exam misconduct and violations of quality control and independence standards, among other things. As part of the settlements, the targets of the proceedings – who have not admitted or denied the findings – have also agreed to take steps to improve their policies & procedures (in the case of the firms) and remedial undertakings & restrictions (in the case of the individuals). PCAOB Chair Erica Williams said the settlements are a big deal:

These sanctions represent the highest civil money penalties the Board has ever imposed against firms in mainland China and Hong Kong, some of the highest penalties the Board has imposed against any firm around the globe, and the first time ever that the PCAOB has been able to bring enforcement action against a mainland Chinese firm based on its audit deficiencies.

The days of China-based firms evading accountability are over. The PCAOB is demonstrating that we will take action to protect investors in U.S. markets and impose tough sanctions against anyone who violates PCAOB rules and standards, no matter where they are located.

The PCAOB thanked the SEC for its assistance in this effort, and Chair Gensler issued a statement applauding the protection of American investors.

– Liz Dunshee