More than one year after US regulator Public Company Accounting Oversight Board (PCAOB) revoked the US registration of Hong Kong audit firm AWC (CPA) Limited, the Hong Kong Institute of Certified Public Accountants has reprimanded the firm and three CPAs. It ordered two of the parties to each pay an administrative penalty of HK$25,000 (US$3,200).
The parties reprimanded and fined are Wong Chi Wai, Chung Mun Leung and Wong Fei Cheung, all certified public accountants, and Centurion ZD CPA Limited (formerly known as DCAW (CPA) Limited and AWC (CPA) Limited). The Institute, the statutory body responsible for the professional training, development and regulation of certified public accountants in Hong Kong, said the respondents failed or neglected to observe, maintain or otherwise apply professional standards.
Barred in the US
On May 16 last year, the PCAOB ruled that the four parties violated its rules and standards as well as those of the US Securities Act in relation to the 2010-2012 financial audit of US-listed firm Kandi Technologies Group. AWC was the company’s external auditor. Wong Chi Wai was engagement director and Chung Mun Leung engagement quality reviewer, while Wong Fei Cheung was director of audit.
The parties settled the case with the PCAOB without admitting or denying the findings, which included failures in identifying related-party transactions, preparing sufficient and appropriate audit documentation, and identifying an independence violation. AWC was fined US$10,000 and had its US registration revoked, with a right to reapply after two years. Wong Chi Wai was also fined US$10,000 and barred from being an associated person in the US, with the right to request lifting the bar after two years.
Fined in Hong Kong
The PCAOB fined Chung Mun Leung and Wong Fei Cheung US$5,000 each, with Chung granted the right to request lifting a bar on being an associated person in the US after two years and Wong after one year. The HKICPA has now fined Centurion and Wong Chi Wai the equivalent of US$3,200 each. In addition, all four respondents were ordered to jointly pay costs of HK$10,000 (US$1,280).
The audit firm and the three accountants were reprimanded, but not barred from practicing in Hong Kong. The Institute exercised its power to offer a Resolution by Agreement “in uncontested cases considered to be moderate after taking into account the nature and gravity of the complaint, past disciplinary records of the Respondent and any aggravating or mitigating circumstances.”