PricewaterhouseCoopers announced that it will create a new audit firm in Japan after an alliance with a partner was ordered to halt auditing services for two months.

"A permanent new and independent audit firm is being created in Japan," PwC said in a statement, even as the Big Four firm promised it would maintain a partnership with ChuoAoyama Audit Corp. ChuoAoyama, which employs 2,500 people, is a member firm of PwC and recently received penalties for poor supervision of its staff.

Poor internal controls at ChuoAoyama, which audits the financial statements of more than 5,500 companies, led to Japan's Financial Services Agency ordering the firm to suspend any audits that fall under securities and exchange, or corporate laws for July and August. It was the first order for one of the country's Big Four firms and will likely affect more than 2,000 companies. The regulator specifically cited ChuoAoyama's audit of cosmetics company Kanebo Ltd., in which three of the firm's partners allegedly assisted with accounting fraud and boosted earnings for the company by about $1.9 billion over the course of five years.

Last week, the chairman of the Japanese Institute of CPAs warned other firms about poaching ChuoAoyama's clients.Details on PwC's new firm, including when it will open for business, will be announced next week, according to spokespeople for PwC.

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