PCAOB Yanks Registration from Hong Kong Audit Firm

Chris Gaetano
Published Date:
Jul 26, 2017
By User User:Dice on zh.wikipedia - Originally from zh.wikipedia; description page is (was) hereUser:, CC BY-SA 3.0

The Public Company Accounting Oversight Board (PCAOB) censured and revoked the registration of Crowe Horwath Hong Kong over refusal to cooperate with a board investigation.

The PCAOB order said that the board opened a formal investigation regarding the firm's audits and reviews of the financial statements of a China-based issuer in March 2016. The board ordered the firm to produce the audit work papers and other documents related to the firm's audits. Through its lawyers, the firm told the PCAOB in April 2016 that it would not comply with the order. It based this decision on guidance it received from the PRC Ministry of Finance to not give up the audit work papers, as the PCAOB did not make a request for assistance under the memorandum of understanding between the PCAOB, the China Securities Regulatory Commission and Ministry of Finance. The board, however, said that is not a valid justification, as the memorandum of understanding was not intended to create legally binding obligations, nor was it meant to the supersede domestic laws of all parties involved. The firm continued to assert it could not provide the audit work papers and other documents due to the guidance it received from its own government. This resulted in the board leveling sanctions against the firm. 

The firm consented to the sanctions and admitted to the facts, findings, and violations in the order. Crowe Horwath HK's registration was revoked with a right to reapply after three years. The firm also was censured.

"Regardless of their location, the PCAOB is prepared to bring disciplinary proceedings against registered audit firms that fail to comply with their obligations under U.S. law to provide information requested by the PCAOB," said Claudius B. Modesti, Director of PCAOB Enforcement and Investigations. "These firms are gatekeepers to protect investors in U.S. capital markets."

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