PCAOB Penalizes TPS Thayer After Cross Border Audit Failures

If you’ve ever watched someone try to fix a leaky pipe with duct tape, you know exactly how the PCAOB feels about sloppy audit work. It might hold for a minute, but sooner or later things burst wide open. That is exactly what happened with TPS Thayer LLC, a U.S. audit firm that just got hit with a serious wake-up call. In a decisive move, the Public Company Accounting Oversight Board sanctioned the firm for a string of failures across five audits tied to two China-based companies. These were not “oops” moments. The PCAOB cited missteps in planning, supervision, and transparency that cut right to the heart of audit quality. Below is the full breakdown of what went wrong, why it matters, and what U.S. audit pros need to learn from this before they find themselves in the PCAOB’s hot seat.

The Backstory Before Things Went Sideways

Between 2020 and 2022, TPS Thayer handled audits for Huadi International Group and Ostin Technology Group, both of which operate primarily in China. Instead of performing the heavy lifting themselves, the firm leaned on an unregistered China-based firm referenced as Firm A. And here’s the kicker: Firm A played a substantial role. That is a major no-go under PCAOB rules, which require any firm contributing significantly to an issuer audit to be properly registered. But TPS Thayer didn’t just rely on an unregistered firm. According to the PCAOB and additional reporting from major accounting outlets, the firm failed to disclose Firm A’s involvement in:

• Form AP filings, and
• Audit committee communications

In plain English, key stakeholders were kept in the dark. That is the kind of transparency gap that regulators treat like a flashing red alert.

PCAOB Comes in Swingin’

On December 4, 2025, the PCAOB issued a settled disciplinary order that laid everything out with no sugarcoating. The Board found that TPS Thayer:

• Failed to properly plan five issuer audits,
• Did not reasonably supervise the unregistered China-based Firm A, and
• Omitted required disclosures in official filings and with audit committees.

The sanctions came fast and firm:

• Formal censure,
• A $100,000 civil penalty, and
• Mandatory remedial actions to clean up the mess.

And this ruling wasn’t a one-off. Just a few months earlier, the PCAOB sanctioned Marcum Asia CPAs for missteps relating to its work for Beijing-based Gridsum Holding and its transfer of workpapers to a Chinese successor auditor. In other words, the PCAOB is checking receipts. Cross-border audit work is officially on their radar in a big way.

The PCAOB Isn’t Playing Around

Let’s call it what it is: the PCAOB is tired of firms trying to “wing it” with international audits. With growing reliance on foreign affiliates, especially in China, some U.S. firms have slipped into risky habits like informal delegation or light-touch supervision. But the TPS Thayer case makes something crystal clear: You can outsource the workload, but you can’t outsource the responsibility. And regulators aren’t buying the “we didn’t know” story anymore. If an overseas firm is doing heavy work, U.S. auditors are expected to know exactly who they’re partnering with, how the work is done, and whether every rule is being followed. Think of it like loaning your car to a friend. If they rack up speeding tickets, it’s still your car, and the fines still come your way.

The Future of PCAOB Enforcement

Expect the PCAOB to keep that “zero chill” energy going, especially when China-based operations are involved. The regulator has been increasing inspection access overseas, and high-profile cases like this show they’re ready to crack down on even mid-sized U.S. firms. Industry insiders believe we’ll see:

• More enforcement actions tied to unregistered firms,
• Stricter expectations for disclosure, and
• Tightened scrutiny of cross-border audit relationships.

For U.S. firms trying to save time or money by tapping international partners, the wiggle room just got way smaller. One wrong move and it’s “game over, buddy.”

Takeaway for Professionals

Here is what audit professionals need to take home from this case:

• Registration Isn’t Optional: If a partner firm plays a substantial role in an audit, it must be PCAOB-registered. No shortcuts, no exceptions.
• You Stay Accountable, No Matter Who Helps: Delegating work does not delegate liability. Your signature means your responsibility.
• Transparency Keeps You Out of Trouble: Failing to mention a collaborating firm in Form AP or audit committee communications destroys trust and triggers enforcement.
• Good Planning Isn’t Just Nice to Have: TPS Thayer’s five poorly planned audits contributed directly to this fallout. Strong planning = strong compliance.
• Cross-Border Audits Need Extra Eyes: With China-related engagements facing heightened PCAOB scrutiny, firms must be extra sharp in supervision, documentation, and disclosures.

Final Word

The TPS Thayer case is a textbook example of how operational shortcuts can turn into regulatory nightmares. The PCAOB isn’t just raising the bar; it’s enforcing it with teeth. For U.S. audit firms partnering overseas, the playbook has changed. Compliance, transparency, and supervision aren’t just checklist items. They are the backbone of audit integrity. Stay sharp, stay compliant, and stay honest, or be ready to pay the price.