The Public Company Accounting Oversight Board sanctioned James Pai CPA and its sole owner and partner Yu-Ching James Pai for audit failures.
The PCAOB found that Pai and his firm violated multiple PCAOB rules and standards in connection with two audits of one issuer client, that the firm violated quality control standards, and that Pai directly and substantially contributed to those violations. In the audits, the firm and Pai failed to perform risk assessments and obtain sufficient audit evidence in multiple areas, including revenue and related party transactions. Pai did not immediately respond to requests for comment.
"Performing appropriate risk assessments and obtaining sufficient evidence are fundamental to an audit, and failure to meet these most basic requirements puts investors at risk," PCAOB chair Erica Williams said in a statement.
The PCAOB also found that, in the audits, the firm failed to perform engagement quality reviews, obtain written representations from management, comply with requirements concerning critical audit matters and audit committee communications and documentation, and establish a system of quality control.
"Issuing an audit report stating that the audit was performed in accordance with PCAOB standards is a solemn commitment to the investing public, and serious consequences can follow when an auditor fails to meet that commitment," Robert Rice, director of the PCAOB's Division of Enforcement and Investigations said in a statement.
Without admitting or denying the findings, Pai and the firm consented to the PCAOB's order, which:
- Censures Pai and the firm and imposes a $40,000 civil money penalty, jointly and severally, against them;
- Revokes the firm's PCAOB registration with a right to reapply after three years;
- Bars Pai from being an associated person of a PCAOB-registered firm, with a right to petition the Board to terminate his bar after three years;
- Requires the firm to undertake remedial actions to improve its system of quality control and procedures before reapplying for registration; and,
- Requires Pai to complete 40 CPE hours before seeking to terminate his bar.
