Houston Community News >> Japan Penalizes PricewaterhouseCoopers

5/16/2006 Tokyo (AP) -- Japan's financial watchdog on Wednesday ordered ChuoAoyama PricewaterhouseCoopers to suspend part of its auditing services for two months because of an accounting fraud. The Financial Services Agency barred ChuoAoyama -- a Japanese partnership with the PricewaterhouseCoopers group -- from statutory auditing services between July 1 and Aug. 31 over fraudulent practices at textile and cosmetics maker Kanebo Ltd.

But regulators said they will let ChuoAoyama continue auditing some companies, such as those closing their books in April and May, as those companies need to submit annual or semiannual financial statements in July or August for their shareholders' meetings. PricewaterhouseCoopers said in a statement it regretted the actions of three former ChuoAoyama accountants in connection with the Kanebo fraud.

The three accountants turned a blind eye to falsified annual reports and certified them for the five Japanese fiscal years through March 2003, the FSA said. It handed down the penalty after determining that ChuoAoyama lacked adequate reviewing systems and internal controls to prevent accounting fraud, the FSA said. The fraud led the Tokyo Stock Exchange to delist Kanebo last June. Two former Kanebo executives received suspended prison terms this March for falsifying financial statements.

ChuoAoyama has more than 2,000 clients that receive statutory auditing, including publicly traded companies such as Toyota Motor Corp. and Sony Corp. The punishment could prompt them to look for different auditors. Regulators also ordered ChuoAoyama to submit a report on its internal reviews and an improvement plan within a month. PricewaterhouseCoopers said it would assist ChuoAoyama to implement its improvement plan. It also indicated it planned to create a new, independent audit firm in Japan.