The Public Company Accounting Oversight Board (PCAOB) has announced sanctions against James Pai CPA and its sole owner and partner, Yu-Ching James Pai, for multiple violations of PCAOB rules and standards during two audits of an issuer client.
The firm was reprimanded for not adhering to quality control standards and Pai was found to have contributed to these violations.
PCAOB chair Erica Williams said: “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.”
The PCAOB’s investigation was led by Tony Chen, Sherry Tao, and Kristy Gold, under the supervision of William Ryan, John Abell, and Joshua Cutler.
It revealed that the firm and Pai did not perform adequate risk assessments and failed to obtain sufficient audit evidence in several areas.
These areas included revenue recognition and transactions with related parties.
In addition, the firm did not conduct engagement quality reviews and failed to secure written representations from management.
It also did not comply with requirements regarding critical audit matters, audit committee communications, and audit documentation.
Furthermore, it was found lacking in establishing and implementing a system of quality control to ensure that the work performed met professional standards and regulatory requirements.
The PCAOB concluded that Pai either perpetrated or played a role in the same violations.
Its order, which Pai and the firm agreed to without admitting or denying the findings, includes a censure and civil money penalty of $40,000.
The firm’s PCAOB registration is revoked with the possibility to reapply after three years.
Pai has been barred from associating with any PCAOB-registered firm, with a right to petition for termination of this bar after three years.
The firm is required to undertake remedial actions to enhance its system of quality control and procedures before it can reapply for registration.
Pai is also mandated to complete 40 hours of additional continuing professional education before he seeks to terminate his bar.
The announcement follows a recent statement of protocol between the PCAOB and the Autoritatea pentru Supravegherea Publica a Activitatii de Audit Statutar (ASPAAS) of Romania, aimed at facilitating cooperation in the oversight of auditors within their respective jurisdictions.
