Hong Kong Auditor of Luckin Coffee Sanctioned for Violating PCAOB Rules

The Public Company Accounting Oversight Board (PCAOB) has sanctioned a Hong Kong accounting firm, Centurion ZD CPA & Co, and its owner, Chan Kam Fuk, for disregarding rules and standards when auditing Luckin Coffee and two other Chinese companies. The PCAOB permanently revoked Centurion's registration, set a permanent bar against Chan, and imposed a $75,000 penalty. The PCAOB has taken action against Chinese-based accounting firms for various violations, including falsifying audit reports and sharing test answers.

The Public Company Accounting Oversight Board (PCAOB) has taken stringent action against Hong Kong-based accounting firm Centurion ZD CPA & Co and its owner, Chan Kam Fuk. The PCAOB permanently revoked Centurion's registration, imposed a $75,000 penalty, and barred Chan from practicing accounting. These sanctions stem from violations during audits of Luckin Coffee Inc. and two other companies operating in China.

The PCAOB cited several failures by Centurion ZD CPA & Co, including inadequate risk assessments and insufficient audit evidence. The firm also failed to communicate effectively with audit committees and violated PCAOB reporting standards. These violations were evident in the 2021 audit of Luckin Coffee, following a 2020 investigation that revealed fabricated transactions by the company.

Chan Kam Fuk, the sole partner of Centurion ZD CPA & Co, was directly held responsible for these violations. The PCAOB's sanctions also extended to audits of a second Chinese company and audit procedures for subsidiaries of a Malaysian company. The firm's numerous violations indicate a lack of quality control and failing to ensure personnel met professional standards.

This action is part of the PCAOB's ongoing effort to protect investors and ensure compliance with audit standards. The PCAOB has previously imposed sanctions on other accounting firms for similar violations, including PWR CPA over its 2022 audit of Ainos and for consistently failing to meet reporting requirements in audits of four other issuers.

References:
[1] https://news.bloomberglaw.com/financial-accounting/us-audit-board-chair-presses-china-inspection-access-on-last-day
[2] https://www.internationalaccountingbulletin.com/news/pcaob-permanently-revokes-firms-registration/