The Securities and Exchange Commission announced Thursday that Big-Four accounting firm Deloitte’s China affiliate had agreed to pay $20 million to settle charges that it has asked clients to select their own samples for examination, and to prepare audit documentation purporting to show that Deloitte China had done the necessary work to verify financial statements.

“We find that Deloitte-China fell woefully short of professional auditing requirements in numerous component audits of Chinese operations of U.S. issuers and audits of Chinese companies listed on U.S. exchanges,” SEC Chairman Gary Gensler said in a statement.

The regulator found nine instances where Deloitte-China failed to properly audit the Chinese operations of U.S. companies and three instances related to Chinese firms listed on U.S. exchanges, SEC officials told reporters.

The $20 million fine represents the largest penalty relative to revenue ever imposed on an accounting firm, the officials added.

“This action involves audit failures at the most basic level,” said Gurbir Grewal, director of the SEC’s enforcement division, in a press release. “Across multiple years and audit engagements, Deloitte-China auditors failed to meet professional standards, exercise independence and fulfill their essential role as gatekeepers.”

The enforcement action comes amid heightened scrutiny of Chinese accounting standards, and as the SEC and Public Company Accountancy Oversight Board are in the process of implementing the Holding Foreign Companies Accountable Act, which requires Chinese firms listed on U.S. exchanges to submit to PCAOB oversight.

In August, U.S. securities regulators reached a deal with their Chinese counterparts to allow inspection of audit papers of Chinese companies, a necessary step to avoid delisting of those companies as would be required by the new law.

The agreement could open the door for major Chinese companies like Alibaba Holding Group Ltd.  BABA, -4.31% and JD.com Inc.  JD, -4.06%  to continue to raise capital from U.S. investors, though officials warned that this is only the beginning of a long process of ensuring compliance with new laws that require foreign firms to follow the same accounting regulations as their U.S. peers.

Gensler at the time called it “merely the first step in the process” of making Chinese compliant with U.S. law, and that its ultimate success depends on Chinese companies following through with their commitments.

If they don’t, “roughly 200 China-based issuers will face prohibitions on trading of the securities in the U.S. if they continue to use those audit firms,” Gensler said.

SEC officials say that the Deloitte China investigation began in 2019 after Deloitte-China came forward with its wrongdoing, prior to the passage of the HFCAA, though Gensler said the incident “underscores the need for the PCAOB to be able to inspect Chinese audit firms.”