This article is from the WeChat public account: Economic Observer (ID: eeo-com-cn) , author: known by Miao, from the cover: Oriental IC

If the financial statements disclosed by a listed company are subsequently found to be fraudulent, the authenticity, accuracy, and completeness of the audit report of the accounting firm that has “endorsed” it will be questioned by law enforcement, although the accountant can Already diligent and dutiful as a defense, in practice, it is difficult to stay out of this.

In recent years, the CSRC has strengthened the supervision of the securities market business of accounting firms. On November 21, Zhonghua Certified Public Accountants was ordered to suspend the undertaking of new securities business and rectify within a time limit due to the penalty imposed by the Securities Regulatory Commission. Earlier, the more prestigious Ruihua and Lixin accountants also suffered from what the industry calls “continued” treatment, that is, a document issued by an accountant in the firm was investigated by the Securities Regulatory Commission for suspected false information. , The documents issued by the accountants of the whole firm will not be accepted by the CSRC. Ruihua Lixin’s irrelevant accountants also appeared to leave.

Accounting firms can be said to be one of the core components of the underlying design or infrastructure of the capital market. Financial information is a major part of information disclosure of listed companies, and the responsibility of accounting firms is to audit the financial information in prospectuses, annual reports and semi-annual reports provided by the company, and to issue independent audit reports.

In layman ’s terms, Accounting firms are the outer line of defense to prevent listed companies from making false accounts. If an accounting firm is unable to issue a standard, unqualified audit report for a company, then basically Can confirm that the financial reports of listed companies are tricky. Conversely, if the financial statements disclosed by a listed company are subsequently found to be fraudulent, the authenticity, accuracy, and completeness of the audit report of the accounting firm that has “endorsed” it will be questioned by law enforcement < / strong> Although the accountant can argue that he is already diligent and responsible, in practice, it is difficult to stay out of this. And the extent to which firms should be held accountable is also worth exploring.

Isolation mechanism for class shareholders

Compared to companies with relatively clear and hierarchical leadership at all levels, accounting firms set up multiple registered accountant partners as sub-centers. (law firms Is similar in structure) , which is relatively flat. Accounting firms are nominally the undertakings of auditing business, but the actual undertakings are one or more partner teams, which are relatively independent from other partner teams. In each team, there are several non-partner accountants, who have a substantial employment relationship with the partners.

The highest authority of an accounting firm is a meeting of partners. The directors, management partners, and other “leds” are not business partners of the partners. Their main responsibility is to coordinate the relationships between different partners, and to formulate and implement common practice rules and profits for the partners. Distribution rules.

Accounting firms are legally referred to as “special general partnerships.” It is different from modern companies whose shareholders have limited liability for corporate debt, nor is it a limited partnership where some partners have limited liability, nor is it a general partnership where all partners have unlimited liability for corporate debt. Article 57 of the Partnership Enterprise Law states:

“If a partner or several partners cause deliberate or gross negligence in the debts of the partnership during their practice activities, they shall bear unlimited liability or joint and several liability, and other partners shall be limited to their share of property in the partnership Take responsibility.

Partners in partnership activities that are not caused by intentional or gross negligence and other liabilities of the partnership enterprise shall bear unlimited joint and several liabilities. “

This means that everyday partnership debts (such as rent for office space) unlimited liability for all partners, but partners Liability for damages caused by faults such as participation in counterfeiting shall be borne solely by the “perpetrators”. The commitment of other partners to share in the property of the partnership is limited liability, up to the end of compensation.

These treatments mean that the legal status of a partner is similar to that of a shareholder in a limited partnership or limited liability company when encountering the practice risks of others. And to ask about the legitimacy of this institutional arrangement, we may wish to review the original intention of the limited liability system.

As I wrote in the article “Lessons from Luo Yonghao’s Unlimited Liability” on November 11th of this editionIn other words, the basic function of the limited liability system is to make corporate participants “reassured”, that is, they only need to be responsible for their own actions, without paying too much attention to the actions of other participants in the company, without paying too much supervision costs. (In fact, supervision is difficult to achieve) . The special general partnership is a “professional service agency that provides paid services to customers with professional knowledge and expertise” (Article 55 of the Partnership Enterprise Law) In the modern and increasingly professional commercial market, on the one hand, we need to encourage the gathering of professional service personnel to enhance the professional level. Especially in the field of financial auditing, when signing a contract with a listed company, an accounting firm of a larger scale can be in a less vulnerable negotiation position. On the other hand, the ability and necessity of professional service personnel to resolve “mutual supervision” is still limited. Therefore, the law fully exempts partners’ accountants from liability in the field of practising risks, allowing accountants to worry about others as little as the company’s minority shareholders, eliminating the fear of the joint construction firm, and helping the firm to grow bigger and stronger.

Reliable mechanism for monitoring partners

Therefore, the practice of “continuing” for the “offender” accountant’s office may not be in line with the law’s basic positioning of a special general partnership. Although the nature of administrative liability and civil liability are different, they are consistent in how to prevent the occurrence of professional negligence. The original intention of “seat together” is to strengthen the supervision mechanism within the firm and implement governance from the source. This supervision method has two paths, one is to let partners supervise each other, and the other is to strengthen the subjective standard of the firm and let the firm supervise.

Partner supervision of each other, as mentioned earlier, is not feasible. First, the basic structure of the special general partnership is that the partners’ “parallel worlds” are launched separately, and auditing is a meticulous activity that requires a lot of manpower and time investment. It is not effective to supervise external inspections, slight investigations, and occasional spot checks. Supervision will not only cause serious friction in interpersonal relationships, but also a lot of energy of the supervisor, occupying the quality of (audit) which hinders the accountant’s job. The second is the dilemma of “supervising and supervising”. Even if Accountant A is willing to sacrifice income, and deeply enters into Accountant B ’s team to carry out supervision in order to dispel his doubts, other accountants still have doubts about “Can believe in A”. Obviously, it is impossible for all partners to supervise all partners at the same time.

The supervision exercised by the accounting firm itself is inherently reasonable. Because the system promotes the establishment of an office, rather than let the certified public accountants practice in a “self-employed” manner, it is originally to better motivate and monitor accountants through an organized brand effect. The firm can supervise the work of the partners by formulating detailed training and practice rules, using quality inspection methods explored collectively, and arranging senior accountants on a rotating or full-time basis.

However, the “sit-and-hold” regulatory measures (Since the person being imposed is not illegal, it does not yet constitute a form of administrative responsibility) instead Such organizational-level oversight efforts may be eliminated. This is because the firm itself has a strong human nature. For a newly established and small number of firms, the firm is almost a pure collection of partners, and the cost of a partner leaving the office is very low. Instead, partners of large-scale, long-established, credible firms like Ruihua and Lixin will suffer a large brand premium when they leave the office. In other words, “Good Place” could have played a role of supervising and restricting partners, but in the face of Taishan’s peak of “continuous sitting”, the basic livelihood of partners was affected, and the main accounting business was still “following people” Instead of “following the way”, we will see the scene is to avoid the disaster of the pond fish, irrelevant partners have retired, causing the firm itself to collapse, and some of the junior accountants directly employed by the firm Will become a new pond fish.

Of course, this may be in line with the original purpose of the regulator, that is, to make the unrelated partners suffer the pain of having to change offices and see the brand value of the original office disappear, and force the prior supervision mechanism. However, since the firm, rather than other partnership talents, is an internal oversight force that can be truly relied on, the difficulty of a partner leaving the firm is far lower than the difficulty of the firm’s launching a partnership. There will be unexpected reactions.

Suppose that all irrelevant partners except the few faulty partners collectively organize a new office. For example, Ruihua’s irrelevant partners collectively set up a “Huarui” office, changing soup without changing medicine, changing bottles without changing soup, The crackdown on that regulation is failing. Assuming irrelevant partners are scattered to various offices, the organizational rules that originally formed at the organizational level, which may be effective, or even that the individual partners do not follow, will be lost. When the organization of the cracked firm is better than the new office that partners may run into, the problem of “loss of gain” will arise.

When there is a quality defect in a tangible factory product, it may be due to a flaw in the design, process or assembly line of the whole factory, so all the same products that are removed from the shelf sometimes have (but not always) is a good strategy. However, the “product” of a special general partnership is the product of a separate operation. A problem with an audit report may not be a problem with the quality control process of the whole firm. Regulators can appropriately treat this differently to achieve precise supervision. When there is reason to suspect that there is a general risk of practice in the whole firm, the “one-size-fits-all” measures such as suspension of new business application should be applied to the firm. Generally speaking, the responsibility of the organization should be limited to the form of fines, etc., because this form of responsibility can be redistributed within the organization to the corresponding true responsible party.

This article is from the WeChat public account: Economic Observer (ID: eeo-com-cn) , author: Miao by known