Managing partner Steven Sherb and two non-equity partners, Christopher A. Valleau and Mark Mycio, were barred for five years; Steven N. Epstein, a senior audit manager, for three years. Mycio has served as chair of the Financial Accounting Standards Committee of the New York State Society of Certified Public Accountants. In May, Sherb & Co. sold its accounting practice to Russell Bedford firm, RBSM.

Sole equity owner Steven Sherb was flagged for what the SEC called "a complete failure in the firm's quality control policies and system in actual practice." In the case of client company, Wowjoint, Sherb did not review audit planning workpapers or he would have discovered that in the initial client acceptance, the audit team said  Wowjoint's financial reporting system appeared to be "insufficient to provide evidence to support that transactions have occurred and that all the transactions that should be recorded are, in fact, recorded."

Sherb's team did not spot possible fraud in the 2007 financial statements of the China Sky One Medical. While the firm hired a contract auditor, it only communicated with her via a single email. Workpapers were a few forms with generic checklists, not properly completed and which made no reference to the distribution agreement. Valleau and Epstein never met to discuss the possibility of fraud, the SEC said.

CKSI fabricated $12.2 million in revenue for its slim patch weight loss product. But the CPAs failed to discover that CSKI lacked an agreement with a Malaysian distributor, nor did it sell products to two customers reported as providing 25 percent of its revenue.

Another client, China Education Alliance, provides educational products and tutoring services to primary school students online and through training centers located in China. The SEC said the auditors failed to physically inspect fixed assets or perform analytical procedures even though CEU reported a 51-percent increase in fixed assets at the end of 2010, compared to a year earlier.

During an inspection of a third client, Wowjoint, based in Beijing, China, a staff auditor reported that a client's manager offered him a bribe, but Mycio did not investigate the report or discuss the incident with the audit team.

Wowjoint designed and manufactured large industrial equipment. While the firm assigned a staff member with the percentage of completion accounting method used in Taiwan for the audits of financial statements for 2008 and 2008, he had no experience in the method used in the United States.

And although Valleau was engagement partner for the 2008 through 2010 audits, he charged no time to the client until May 2011 and was not copied on most email communications covering audit issues. The firm also failed substantially follow up on the fact substantial portion of those accounts receivable were greater than one year delinquent.

Wowjoint's controller also informed Epstein that the company utilized cash basis accounting that resulted in an underestimate of liabilities that lead to understatement of cost of sales and then overstatement of profit. But that information was also not followed up.