PCAOB bans auditor of last resort | China Accounting Blog | Paul Gillis

PCAOB bans auditor of last resort

On May 19, the Public Company Accounting Board revoked the PCAOB registration of Hong Kong CPA firm AWC (CPA) Limited (AWC), formerly known as Albert Wong & Company. AWC has long been one of the auditors of last resort for Chinese companies listed in the United States, particularly those that came to market through reverse mergers. 

The client that finally brought down AWC was Kandi Technologies Group, Inc. (Kandi). Kandi is a Chinese electric vehicle company that was still using AWC as auditor for 2015.   

Here is a list of AWC’s public companies from its website:

1. Kandi Technologies, Corp. (NASDAQ trading code KNDI), a motor vehicle producer in China.

2. QKL Stores Inc. (NASDAQ trading code QKLS), a supermarket chain store in China. 

3. Shengkai Innovations, Inc. (NASDAQ trading code VALV), a high tech manufacturer in China.

4. Dragon Bright Mintai Botanical Technology (Cayman) Ltd. (NASDAQ trading code DGBMF), a wood products company in China.

5. ACL Semiconductors Inc. (OTCBB trading code ACLO), a semiconductor trader in H.K. 

6. AlphaRx, Inc. (OTCBB trading code ALRX), a pharmaceutical company in H.K. 

7. Greatmat Technology Corporation F/K/A Aurum Explorations, Inc. (Other OTC trading code ARMX), a holding company in H.K. 

8. Baoshinn Corporation (OTCBB trading code BHNN), a travel service provider in H.K. 

9. China Education Alliance Inc. (OTCQX trading code CEAI) an educational and training center in China. 

10. China Executive Education Corp. (OTCBB trading code CECX), an executive education course provider with operations in China. 

11. China Media Group Corporation (OTCBB trading code CHMD), a media advertising and electrical home appliance company in Hong Kong and Malaysia.

12. CN Dragon Corporation (OTCBB trading code DRGN), a holding company in H.K. 

13. Iveda Solutions, Inc. (OTCBB trading code IVDA), a video hosting, archiving and real-time remote surveillance service provider in the United States and Taiwan. 

14. Oakridge International Corporation (OTCBB trading code OAKO), a waste management corporation in Hong Kong and Australia. 

15. Sunway Global Inc. (OTCBB trading code SUWG), a medical equipment producer in China. 

16. T.O Entertainment, Inc., a live and animated films producer and distributor in Japan. 

17. Uni Core Holdings Group Ltd. (OTCBB trading code UCHC), a manufacturer and wholesaler of paper products in China. 

18. Yanglin Soybean Inc. (OTCBB trading code YSYB), an agricultural product processor in China. 

19. XcelMobility Inc. (OTCBB trading code XCLL), mobile Internet applications on cellular phones, smartphones, tablets and mobile computers designer in China

Here is a stunt that should not work. As the PCAOB disciplinary proceeding came to a conclusion, AWC merged with effect from April 30, 2016 with Dominic K.F. Chan & Co to form DCAW, a firm that filed to succeed to the PCAOB registration of Dominic K.F. Chan & Co.  That seems a clever way to circumvent the imminent ban of AWC. On May 9 AWC’s clients announced they were changing auditors to DCAW. The AW in the name presumably is Albert Wong. Albert Wong, however, is personally banned from association with PCAOB registered firms for at least two years. I am sure the PCAOB is looking into this odiferous situation. 

The acts for which AWC is losing its US public company practice rights took place beginning in 2011. There is no indication of when the PCAOB investigation began. Kandi has been alleged to be a fraud a few times starting in 2011, but the stock still trades.  This is one of the major problems with the PCAOB. AWC has continued to audit for years without public knowing of the cloud over them because the PCAOB is not permitted to disclose pending disciplinary actions until they are final. Congress needs to change that rule to protect investors.

Since AWC and DCAW are Hong Kong CPA firms the next thing that should happen is an investigation by the Hong Kong Institute of CPAs. Don’t hold your breath for that.  

Copyright ©  2020         Paul L. Gillis all rights reserved