Sanctions on Chinese and Hong Kong auditors announced this week reveal just the first problems the US audit regulator is expected to uncover as it uses new access to probe the work of firms that check the books of US-listed businesses based in the two Asian markets.
The Public Company Accounting Oversight Board on Thursday announced hefty penalties against the Chinese and Hong Kong affiliates of Big Four auditor PwC and a third Chinese auditor—its first set of sanctions under a historic deal with Beijing signed last year. Among the findings, the board said that Shandong Haoxin Certified Public Accountants Co., Ltd., audited three years of financial statements for a data analysis software company in a single day.
“In all likelihood, this is the tip of the iceberg,” said Jacob Frenkel, chair of the government investigations and securities enforcement practice at Dickinson Wright PLLC.
Risky Market
The vast Chinese economy is a lucrative market for both US investors and global audit firms. More than 200 Chinese-based companies worth roughly $1 trillion are listed on US exchanges. The market comes with major risks including that companies might inflate their sales, obscuring their true…
