Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
PwC has been fined $7mn after a US regulator found that more than 1,000 of its audit staff in China and Hong Kong cheated on internal training exams designed to get them up to speed on US standards.
The Public Company Accounting Oversight Board said that PwC staff improperly shared test answers over the course of at least two years up to 2020. Without admitting the allegations, PwC’s Hong Kong firm agreed to pay a $4mn settlement and PwC China agreed to pay $3mn.
The latter is the first penalty imposed by the PCAOB on the Chinese arm of a Big Four accounting firm. For years, the agency was frozen out of China, but a deal between Washington and Beijing last year allowed its inspectors to examine firms there after the US threatened to delist Chinese companies from US stock exchanges if China did not come into line.
“The days of China-based firms evading accountability are over,” PCAOB chair Erica Williams said. “The PCAOB will impose tough sanctions against anyone who violates PCAOB rules and standards, no matter where they are located.”
The PCAOB said that PwC’s Chinese and Hong Kong firms had breached quality control standards by failing to detect or prevent the test cheating. Staff had used two unauthorised software applications to share answers, it said. PwC said that when it discovered the practice, it blocked the software and later reported the matter itself to the PCAOB.
In a joint statement from its Hong Kong and Chinese businesses, PwC said it was “highly regrettable” that staff had shared test answers.
“We have since emphasised to all of our people our policies regarding appropriate conduct during online training courses, along with highlighting the significance of ethical and responsible use of emerging technology,” it said.
The PCAOB also said on Thursday that it had fined another Chinese audit firm, Shandong Haoxin, and four of the firm’s staff a total of $940,000 over audits of a Nasdaq-listed data analytics company called Gridsum Holding.
Gridsum switched auditor to Shandong Haoxin after the firm promised to issue a clean audit report, and the firm’s staff passed off the previous auditor’s work as their own while doing only cursory work of their own to check the company’s financial statements, the PCAOB alleged.
Earlier this year, the Securities and Exchange Commission charged Gridsum and its chief executive with securities law violations for allegedly misusing initial public offering proceeds.
The PCAOB was set up two decades ago after the collapse of Enron to oversee firms around the world that audit US-listed companies.
Williams confirmed that the Chinese authorities were continuing to give its inspectors full access to pursue their work in the country, a determination that has lifted the delisting threat against Chinese companies.
Read the full article here
