SEC Sanctions Hong Kong-Based Firm and Accountants for Audit Failures

The SEC imposed sanctions against the audit firm Baker Tilly Hong Kong Limited ("Baker Tilly") and two accountants for failing to properly audit the year-end financial statements of a company charged with fraud by the SEC.

According to the SEC, Baker Tilly and two of its accountants ignored numerous red flags in 176 related-party transactions, which totaled over $59 million, that were reflected in the internal accounting records of China North East Petroleum Holdings Limited, but not adequately disclosed in its year-end 2009 financial statements.

Additionally, the SEC found that Baker Tilly and the two accountants failed to plan and implement an appropriate audit response to the related-party transactions and issued an audit report containing an unqualified opinion on China North East Petroleum's financial statements.

See: SEC Order; SEC Press Release.