The chairman of the ChuoAoyama PricewaterhouseCoopers board said Wednesday that both he and the deputy chairman will resign to take the responsibility for the firm’s failure to prevent three of its accountants from conspiring in the earnings falsification at Kanebo Ltd., just hours after the auditor was slapped with a suspension order.

The disgraced firm also will change its name as a way of making a fresh start. It plans to solicit ideas from the public this summer.

Earlier in the day, the Financial Services Agency ordered ChuoAoyama, one of the country’s four major auditing firms, to halt statutory auditing services for two months from July 1 for listed firms and those capitalized at 500 million yen or more for its role in the Kanebo window-dressing.

Akio Okuyama, chairman of the accounting firm’s board, told reporters that he and his deputy, Motohiro Sato, will leave their posts after helping to implement the FSA order.

“The firm is taking the punishment seriously and deeply apologizes for causing so much trouble and for the public’s loss of confidence in the firm,” Okuyama said.

“Considering the gravity of the punishment, (the firm) thinks it is desirable to finish off its reforms and to make a fresh start with new power,” he said, referring to internal changes the company had begun working on in October.

The suspension order — the first for a major auditing firm — will affect about 2,300 of ChuoAoyama’s 4,535 corporate clients.

On July 1, the 2,300 clients will have to cancel their auditing contracts with ChuoAoyama and find replacement firms for at least two months, as required under the Corporate Law, which came into effect May 1, FSA officials said.

It is unclear whether so many companies will be able to find auditors to replace ChuoAoyama, and if they do, whether they will return to the scandal-tainted firm after the suspension ends.

The agency has set the suspension to begin July 1 due to the large number of ChuoAoyama’s clients now being audited after closing their books on March 31, the officials said.

The FSA has stripped the certification of two of the three accountants, who worked at the Japanese unit of the PricewaterhouseCoopers Group and were involved in the window-dressing. The third has been ordered not to engage in any auditing for one year from next Monday.

The three were charged in October with conspiring with Kanebo executives to falsify the ailing cosmetics firm’s financial statements for fiscal 2001 and 2002, covering up more than 160 billion yen in liabilities. They have resigned from ChuoAoyama and pleaded guilty in March before the Tokyo District Court.

ChuoAoyama said it will force three other employees who were involving in auditing inspections at the time of the Kanebo falsifications to resign, and two others who were working on inspections will be suspended for six months.

Five other employees who participated in drafting false investigation reports for the FSA will have their salaries reduced by up to 30 percent for up to six months, the firm said.

Disciplinary action will be taken against other employees in early summer, when the auditing firm’s external investigation team submits its findings, ChuoAoyama said, noting it will overhaul its operations, including internal inspections, training and management.

The FSA had said ChuoAoyama lacked proper training, inspection and business control systems in managing its auditing services.

Along with the suspension order, the FSA told ChuoAoyama to report by June 10 measures it will take to prevent further window-dressing and to clarify which parties are responsible for the wrongdoing.

The government “wants and hopes to see (ChuoAoyama) strengthen its auditing discipline” through new measures, said Yuichi Ikeda, an FSA official in charge of corporate disclosure.

The FSA “cannot deny that the measures will result in a loss (for ChuoAoyama), but expect it will win back the trust of companies and investors.”

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