Connect with us

Why PCAOB Blocked a Hong Kong Auditor?



PCAOB Blocked Hongkong AuditorFollowing the U.S. Securities and Exchange Commission’s increased focus on Chinese-based companies that trade on American stock markets, today (06/10/2011)’s headline at Bloomberg said that, the Public Company Accounting Oversight Board (PCAOB)—for the first time since toughening rules—blocked a Hong Kong-based auditor named Zhonglei CPA Co. to become a registered U.S. auditor, citing an inability to inspect its work for companies based in China.

The PCAOB issued a new policy in October 2010 making the inability to inspect auditors in nations such as China a factor when considering whether to approve them. The organization is blocked from inspecting firms based in China.


“Since 2004, the board has approved registration applications of non-U.S. firms with the expectation that any potential obstacles to inspections would be resolved, ” PCAOB Acting said in an October 2010 statement. “The continuing obstacles to inspections in some jurisdictions have forced us to re-evaluate that approach to registration.”

And, yesterday, the SEC cautioned investors about buying stakes in companies that gain listings through so-called reverse mergers, saying they may be prone to “fraud and other abuses.”

In a reverse merger, a closely held firm buys a publicly traded shell company to gain a stock listing, avoiding the scrutiny usually involved in an initial public offering. More than 150 Chinese firms entered U.S. markets through reverse mergers since 2007, according to the PCAOB, which oversees auditors of public companies. And, more than 24 companies have disclosed auditor resignations or accounting problems to the SEC since March.

Zhonglei CPA can appeal the decision. But, Zhonglei CPA decided to stop the application process to be registered as an U.S. auditor and focus on its Hong Kong and China businesses, the company said in an e-mailed response to Bloomberg News today. (Via: Bloomberg).

Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Are you looking for easy accounting tutorial? Established since 2007, hosts more than 1300 articles (still growing), and has helped millions accounting student, teacher, junior accountants and small business owners, worldwide.


Related pages

the economic entity assumption requires that the activitiesstatement of stockholders equity definitioncpa exam release datesinternally developed intangible assetscalculate ending work in process inventorydays payable outstanding calculationcompute cost of goods manufacturedhow to compute amortizationcalculation of cost of goods manufacturedpreferred dividends in arrearscash discount accountingconcept of profit and wealth maximizationsubstantive audit proceduresbad debt expense on balance sheetpromissory note makerirs cost of goods soldvarious methods of evaluation of capital budgeting proposalsfactoring feehow to prepare statement of cash flowshow do you calculate stockholders equityyear end payroll accrualcheque book request letter formatias 2 inventories valuationaccounting gaap conceptsoverdraft facilityeoq examplehow to record prepaid rent journal entrydaily cash sheet templatecore competencies for accountantsexample of promissory note letterfavorable and unfavorable variancesbank reconciliation adjusting entriespreparing closing entriesbookkeeping depreciationpromissory agreement templateprocedure of process costingabatement of penalty sample letterhow to calculate flexible budgetis unearned revenue an asset or liabilitypromissory statementsop 93-7journaling accountingcheque payment receipt format in wordcash flow statement vertical analysiscohan rulepayment promissory noteexamples of current and noncurrent liabilitiesperiodic inventory examplehow to close cash dividends journal entrycash inflows examplesprofit margin asset turnovercpa exam tutordefinition of property plant and equipment ias 16leased auto inclusionfixed asset turnover ratio formula examplemanufacturing overhead journal entryacquireemanagepayrollaccrued expense payablewhen is a flexible budget preparedstock price maximizationformula for horizontal analysisoverapplied overheadstatement of owner equitydifference between cost method and equity method consolidationus gaap lease classificationfactoring receivables definitionwhat does it mean to capitalize interestexplain economic order quantitydilutive securitybest way to prepare for cpa examaccrual to cash basis conversionaccounting for cash flow hedgesaccounting flowchartstimes interest earned ratio calculation