SEC, Utah firm settle case over Chinese poultry business
Feb. 13, 2015
by Erica Shaffer
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WASHINGTON – The Securities and Exchange Commission (SEC) reached an agreement with a Utah-based accounting firm the agency charged with unprofessional conduct.
In July 2014, the SEC charged Child Van Wagoner & Bradshaw (CVB) PLLC failed to properly plan and conduct two audits for Yuhe International Inc., a Nevada-based company with headquarters in mainland China. The company sells broiler chicks for meat production. The agency's action focused on two of the firm's partners, Russell Anderson and Marty Van Wagoner.
As part of the settlement
, the firm was ordered to pay $78,000 plus prejudgment interest, while Anderson was hit with a civil penalty of $40,000. Additionally, Anderson and Van Wagoner cannot appear and practice before the SEC. Both partners may apply for re-instatement after three years on certain conditions, the agency said.
Anderson and Van Wagoner are alleged to have performed "deficient" audits for Yuhe International in 2009 and 2010. In its initial complaint, the SEC said failures in the 2009 audit occurred because "CVB and Anderson effectively performed no audit work of their own and instead relied on the audit-work papers of Yuhe’s prior auditor, which had begun the 2009 audit, but then abruptly resigned without completing it."
In the 2010 audit, SEC said the Anderson and Van Wagoner found Yuhe "lacking effective internal controls" perform a proper audit. But the firm failed to implement auditing procedures that would have accounted for the risks.
"They performed an audit based upon the basic audit procedures within their prescribed checklists without modification, failed to extend procedures to address the known risk of material misstatement, and relied heavily on management representations," SEC said in its complaint. They also failed to provide meaningful direction and supervision to the foreign audit staff CVB hired to perform fieldwork in China.
Yuhe International also is facing allegations of fraud. The SEC sued the chicken company in 2013 on charges of reporting a $15.2 million acquisition of 13 broiler breeder farms that never happened. The agency argued that Yuhe misled its investors by "disseminating a series of materially false statements concerning a purported acquisition of additional chicken farms for more than $15 million". The company launched an initial public offering of $27 million based on the acquisition.
A federal judge issued a default judgment of $56.9 million against the company when representatives failed to appear in court.