PCAOB Revokes Hong Kong Accounting Firm’s Registration, Bars Managing Partner
July 23, 2025
Centurion ZD CPA & Co. and its owner Chan Kam Fuk were sanctioned for violating U.S. auditing and quality control rules and standards related to audits of companies based in China, including Chinese coffee chain Luckin Coffee Inc.
The Public Company Accounting Oversight Board on July 22 revoked the registration of Hong Kong-based accounting firm Centurion ZD CPA & Co. and permanently barred its managing partner Chan Kam Fuk for violating U.S. auditing and quality control rules and standards stemming from audits of companies operating in China, including Chinese coffee chain Luckin Coffee Inc.
In connection with the audits of two public companies and audit procedures for subsidiaries of a third public company, Centurion ZD and Chan failed to properly perform risk assessments and obtain sufficient appropriate audit evidence in testing multiple significant risk areas, according to the PCAOB. One of these was the 2021 audit of Luckin.
In 2020, an investigation by a special committee of Luckin’s board of directors concluded that the company had fabricated transactions resulting in a significant inflation of net revenue, costs, and expenses. That same year, Luckin agreed to pay an $180 million penalty to settle accounting fraud charges brought by the Securities and Exchange Commission.
The SEC’s complaint states that from at least April 2019 through January 2020, Luckin intentionally fabricated more than $300 million in retail sales by using related parties to create false sales transactions through three separate purchasing schemes. According to the SEC, certain Luckin employees attempted to conceal the fraud by inflating the company’s expenses by more than $190 million, creating a fake operations database and altering accounting and bank records to reflect the false sales.
The complaint also says Luckin intentionally and materially overstated its reported revenue and expenses and materially understated its net loss in its publicly disclosed financial statements in 2019. According to the SEC, Luckin allegedly materially overstated its reported revenue by approximately 28% for the period ending June 30, 2019, and by 45% for the period ending Sept. 30, 2019, in its publicly disclosed financial statements. During the period of the accounting fraud, Luckin raised more than $864 million from debt and equity investors.
After Luckin’s misconduct was discovered, the company reported the matter to and cooperated with SEC staff, initiated an internal investigation, terminated certain personnel, and added internal accounting controls.
The SEC’s complaint, filed on Dec. 16, 2020 in the Southern District of New York, charged Luckin with violating the antifraud, reporting, books and records, and internal control provisions of the federal securities laws.
Luckin settled with the SEC without admitting or denying the charges.
According to the PCAOB’s disciplinary order against Centurion ZD on Tuesday, Luckin retained the firm as its auditor following the SEC settlement. However, the accounting firm and Chan failed to use information about this fraud in the subsequent year’s audit to identify and assess risks of material misstatement or to design audit procedures to address fraud risks, the PCAOB said.
Centurion ZD and Chan’s other audit violations included failing to obtain sufficient appropriate audit evidence in a number of significant risk areas in the Luckin audit, in an audit of a second Chinese company, Moxian (BVI) Inc., and in audit procedures performed for certain subsidiaries of the Malaysian company Greenpro Capital Corp., including subsidiaries located in mainland China and Hong Kong. The firm and Chan also failed to make required communications to the audit committees of the two Chinese public companies, the PCAOB said.
The audit regulator also found that Centurion ZD violated auditing standards related to how it reported the audits of Luckin and Moxian—and failed to comply with PCAOB rules in filing multiple required forms designed to inform the board and investors about, among other things, other auditors participating in those audits. As owner and managing partner of the firm, Chan was directly and substantially responsible for the audit reporting violations by Centurion ZD, the PCAOB said.
The board found that Centurion ZD’s system of quality control didn’t provide reasonable assurance that:
The firm assigned work to personnel who have the technical proficiency required by PCAOB standards, and
The work performed by engagement personnel met applicable professional standards and regulatory requirements, especially with regard to exercising the professional skepticism required by PCAOB standards in the performance of issuer audits.
As a result, the PCAOB ruled that Centurion ZD also violated U.S. quality control standards.
The sanctions imposed include a permanent revocation of Centurion ZD’s PCAOB registration, a permanent bar against Chan, and a $75,000 civil money penalty imposed jointly on Chan and his firm, which agreed to the penalties without admitting or denying the findings.
“Today’s order reflects the unique global reach of the PCAOB’s enforcement program, and the board’s commitment to protect investors from auditors that have demonstrated, through numerous violations, a disregard for complying with PCAOB auditing standards and rules,” Robert Rice, director of the PCAOB’s Division of Enforcement and Investigations, said in a statement on July 22.
[CPA Practice Advisor]
