NEW YORK-based accountancy firm Sherb & Co has been barred from performing audit work after US regulators found its audit of three US-listed Chinese companies were “riddled with failures”.
A Securities and Exchange Commission investigation found that the firm and its auditors falsely represented in audit reports that they had conducted the audits in accordance with US auditing standards when it fact they were “riddled with failures and improper professional conduct”.
One of the companies they audited – China Sky One Medical Inc. – has since been charged by the SEC with financial fraud.
To settle the SEC’s charges, the firm and the four auditors agreed to be barred from practicing as accountants on behalf of any publicly traded company or other entity regulated by the SEC. The firm agreed to pay a $75,000 penalty.
“Auditors are critical gatekeepers in the financial reporting process, but Sherb & Co and its auditors failed to live up to their professional obligations in multiple audits during a five-year period,” said Andrew Ceresney, co-director of the SEC’s division of enforcement.
According to the SEC’s order instituting settled administrative proceedings, the flawed audits involved China Sky One Medical, China Education Alliance, and Wowjoint Holdings.
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