A private training institute was enrolling foreign students with insufficient English, passing when it should have failed them, and offering an "inordinate" number of holidays.
The New Zealand Qualifications Authority report ordered Premier Institute of Education to stop enrolling new business students in December last year.
The institute, which formerly focused on hairdressing and beauty courses, expanded into business courses for foreign students in 2016 and had campuses in Auckland, Wellington, Napier and Tauranga.
NZQA's external evaluation last year found a range of problems with the courses. The report included a check of 42 pieces of work, which found Premier staff were passing students who should have failed.
"All 42 assessment samples were found not competent, whereas Premier moderators judged only three of these samples as not competent. It is concerning that the internal moderation processes and review did not identify the prevalence and seriousness of the English language limitation of the students."
Premier executive director Eddie McKay said he felt "let down" by the experienced consultants used to set up the business programme.
"Although we were given confidence by the specialists we brought in our programme that would meet NZQA review requirements, it transpired as a result of the review that not all the requirements were satisfied."
The report said the institute's internal English testing, used for students from countries such as China, failed to meet four key criteria.
"It is likely that students who have been enrolled on the basis of the internal test did not have the necessary English language proficiency for their selected programme."
Premier had adopted an action plan to improve its business courses.
The report also found problems with the way Premier enrolled foreign students. It found the institute accepted some students even though they did not have valid health insurance and did not retain receipts for fee payments. It also said offers of place to students included "an inordinate number of holidays", which was raised with Immigration New Zealand.
The report said Premier had taken appropriate actions to fix the problems.