A Utah CPA firm and two of its partners rubber-stamped the audit work conduct by the predecessor auditor of a Chinese company, the Securities and Exchange Commission alleged this week. The SEC ordered a hearing to be conducted on its allegations that A hearing before an administrative law judge will be held within 60 days of the July 8 order that the hearing be on whether a cease-and-desist order should be issued and whether the two partners and the firm, the former Child Van Wagoner & Bradshaw, be ordered to pay any monetary penalties. Anderson, 53, was the engagement partner, and Van Wagoner, 52, the engagement quality review partner, for the 2008, 2009 and 2010 Yuhe audits. CVB stopped performing audits or public companies on Aug. 1, 2012 and is no longer registered with the Public Company Accounting Oversight Board. In 2012, the firm split into Anderson Bradshaw PLLC and Marty Van Wagoner CPA.
According to the SEC, "Even though neither CVB nor Anderson planned, performed, or supervised the prior firm's audit work, they took that firm's work papers, performed at best a cursory review of them, and then issued an audit report containing an unqualified opinion on Yuhe's financial statements." For the 2010 audit, the partners concluded Yuhe lacked effective internal controls and expressed concern about the company's ability to produce reliable financial statements. The firm also said Yuhe's personnel lacked the knowledge of U.S. GAAP. Nevertheless, the partners failed to implement steps to address identified risks and did not provide meaningful direction or supervision to the foreign personnel hired to conduct field work.
CVB was retained to conduct the 2008 and 2009 audit. It contracted work to the Shanghai, China, office of an international accounting firm. Late in 2009, that office was acquired by another international accounting firm, which was quickly appointed auditor. That firm resigned the engagement on March 5, 2010, citing a number of issues with Yuhe's financials. A major issue was related party transactions as of February 2010 which Yuhe's management had identified as violating Sarbanes-Oxley. These transactions included loans made to related parties without board of director approval. Yuhe had previously said in a public filing the transactions would be discontinued by Dec. 31, 2009.
The Chinese client turned back to CVB complete the 2009 audit.