The Public Company Accounting Oversight Board (PCAOB) has censured PKF Hong Kong and revoked its registration. That means that PKF Hong Kong can no longer audit US listed companies. Three of its partners have also been banned from working for PCAOB registered firms. PKF has a small share of US listed Chinese companies so the action will likely have little effect on the market. All PKF Hong Kong US listed clients need a new auditor.
On January 9, 2014 the PCAOB issued an order of formal investigation of PKF’s audits of an unnamed client (PKF had resigned that account a year earlier). In early April 2015 the PCAOB, pursuant to an Accounting Board Demand, insisted that PKF make available people to testify about the audits. PKF refused, saying Chinese law forbid them from doing so, and insisted that the PCAOB go through the enforcement cooperation MOU with the CSRC. The PCAOB argued that it is not bound to go through the MOU but must follow US law.
I believe this action sends a strong signal to Chinese authorities that the PCAOB is willing to deregister accounting firms that do not cooperate with it. I have heard that the PCAOB has issued an Accounting Board Demand, or something similar to it, to the China Big Four firms in December. I do not expect the firms will comply with the demand, setting up a scenario similar to PKF. If the PCAOB follows a timetable similar to the PKF case, it suggests that a disciplinary action might take place this coming summer, assuming that the PCAOB and Chinese regulators are unable to reach an agreement on inspections.