The Public Company Accounting Oversight Board levied a $100,000 fine and censured Friedman LLP, a former Top 100 Firm that's now part of Marcum LLP, for improper use of Chinese firms during audits of 12 different companies that operate in China.
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The PCAOB found that Friedman allowed two unregistered accounting firms based in China — Peking Certified Public Accountants and Beijing Baijielai Financial Consulting Co. Limited — to play a substantial role in 12 of Friedman's audits. The unregistered firms either performed more than 20% of the total audit hours or incurred over 20% of total audit fees — the threshold for substantial role participation requiring a firm to register with the PCAOB — or both, and in many cases, participation by the unregistered firm far exceeded 20%.
"PCAOB rules are crystal clear — firms playing a substantial role in the audits of public companies must register with the PCAOB," said PCAOB Chair Erica Williams in a statement. "Those who break the rules and put investors at risk will be held accountable."
The PCAOB also found that Friedman violated its standards relating to due professional care, audit planning and quality control in connection with the audits.
Without admitting or denying the findings, Friedman consented to the PCAOB's order and the disciplinary action. The PCAOB imposed a $100,000 civil money penalty and censured the firm.
A Marcum spokesperson did not immediately respond to a request for comment.
Marcum merged in Friedman last year to create a megafirm with revenue exceeding $1 billion (
Last September, the Securities and Exchange charged Friedman with improper professional conduct for failing to comply with PCAOB standards while conducting audits of two public companies from 2017 through 2020. Friedman agreed to settle those charges and to pay approximately $1.5 million in total monetary relief. In one case involving Friedman's audit of the Asian-American grocery chain iFresh Inc. for fiscal years 2017 through 2020, the firm failed to design and perform audit procedures that could have detected undisclosed related-party transactions by the supermarket chain, which was previously charged by the SEC with repeatedly filing materially inaccurate financial statements failing to fully disclose related-party transactions.
Last year, the PCAOB finally reached a long-sought agreement with Chinese authorities to conduct inspections of some of the auditing firms in that country after the SEC threatened to delist Chinese companies from U.S. markets (
Chinese authorities have also pledged to get tough on auditors, imposing a $30 million fine on Deloitte's affiliate in China earlier this month and