Why REDtone used "auditor of last resort"?


David Webb wrote:


US PCAOB sanctions AWC (CPA) Ltd, its New York affliate and 4 individuals
   
The shocking allegations, which are not denied in this settlement, involve the 2010-2012 audits of Kandi Technologies (Nasdaq: KNDI). Incidentally, AWC (CPA) Ltd changed its name last month to DCAW (CPA) Ltd after combining with Dominic K F Chan & Co. The settlement brings into question the continued role of Albert Wong Chi Wai, the engagement partner on the audits, as an INED of 5 HK-listed companies.    


Paul Gillis wrote about the same matter:

"PCAOB bans auditor of last resort"


On May 19, the Public Company Accounting Board revoked the PCAOB registration of Hong Kong CPA firm AWC (CPA) Limited (AWC), formerly known as Albert Wong & Company. AWC has long been one of the auditors of last resort for Chinese companies listed in the United States, particularly those that came to market through reverse mergers. 

The client that finally brought down AWC was Kandi Technologies Group, Inc. (Kandi). Kandi is a Chinese electric vehicle company that was still using AWC as auditor for 2015.   


Regarding Kandi, a 2014 article from "ShareSleuth" (backed by Mark Cuban).


Some of the companies that were audited by this audit firm can be found here, here and here.

Relevant for Malaysia is REDtone Asia Inc., a 92% subsidiary of REDtone International Bhd, listed on the US OTC (Over The Counter) network.

On May 16, 2016 REDtone Asia Inc. changed its auditor to DCAW (CPA) Ltd.

According to Paul Gillis, that is a "stunt that should not work":

As the PCAOB disciplinary proceeding came to a conclusion, AWC merged with effect from April 30, 2016 with Dominic K.F. Chan & Co to form DCAW, a firm that filed to succeed to the PCAOB registration of Dominic K.F. Chan & Co.  That seems a clever way to circumvent the imminent ban of AWC. On May 9 AWC’s clients announced they were changing auditors to DCAW. The AW in the name presumably is Albert Wong. Albert Wong, however, is personally banned from association with PCAOB registered firms for at least two years. I am sure the PCAOB is looking into this odiferous situation.


Was REDtone really not aware of the reputation of the auditor of its subsidiary?

http://cgmalaysia.blogspot.my/2016/06/why-redtone-used-auditor-of-last-resort.html