On The Civil Liabilities Of Accounting Firms To Their Clients

The civil liabilities of accounting firms are not the empty hole that invites the wind. Since the decade of 1980s, the claims to the accounting firms for their professional malpractice became more and more popular on a national wide basis. Generally speaking, the legal liabilities of the accounting firms cover the criminal, civil and administrative liabilities. However, in the juridical practice in China, the orientation of"over administrative liability and little civil liability"does exist. When the accounting firms have the problems of professional malpractice, commonly they are imposed administrative punishments by the relevant government authorities and the Institution of Certified Public Accountants. Few of them are held criminal liable, but seldom are held civil liable. The abovementioned facts have sharp contrasts to the legislatures and judicial practice of other countries. Therefore, this essay focuses on the civil liabilities of the accounting firms.The civil liabilities of the accounting firms include the liabilities to the clients and to the parties in interest. Nevertheless, either in the judicial practice or in the relevant judicial interpretations, it is popular to focus on the"party in interest", but not clear in how the clients could be liquidated. However, the damaged clients have the most primitive motivities to seek judicial remedies from the accounting firms. There might be broad litigations towards the accounting firms by the clients, especially under the poor practice environment in our country. Therefore, it is essential to pay attention to the civil legal relationships between the accounting firms and the clients, to study the civil liabilities of the accounting firms and the applicability of the relevant laws and regulations.This essay has seven sections excluding the Preface. The Preface briefly introduces the background of the study, the meaning and main contents, holding that at the current stage, with the rapid growing economy and civil liabilities of accounting firms, it is necessary to study the civil liabilities of the accounting firms to their clients. Section One interprets the orientation of the accounting profession, and has a general idea of the accounting business, pointing out the reasons of the frequent increasing of the legal liabilities, and lays a professional background for the further analysis of the accounting firms'liabilities. Section Two is on the responsible party of the accounting firms, basing on the current legislatures in and outside China, insists that the accounting firms shall take the limited liability partnership for its organization type and be responsible for the civil liabilities to the clients, and may further charge the Certified Public Accountant in fault or gross negligence thereafter. Section Three briefs the contractual and tortious liabilities of accounting firms and liabilities concurrence, indicating that the determination of the contractual and tortious liabilities of accounting firms have special rule based on the specialty of the profession. Section Four particularly explains the criterion of liability and determination of fault of the accounting firms, indicating the constructive fault liability under the fault liability shall be used as the criterion of liability, and common negligence and gross negligence theories shall be applied to the determination of fault in our country. Section Five elaborates the methods to determine the scope of damages which could be compensated, using"whether the trust exists"and"whether the trust is reasonable"to estimate the causation for such damages. Section Six establishes the counterplea systems for the accounting firms, including the comparative negligence defense, limitation of liability defense and other defenses, which balance the interests between the accounting firms and the clients. Section Seven, being the conclusion of this essay, provides relevant legislative suggestions regarding relevant legal systems on accounting firms'civil liabilities to decrease the risks of the accounting profession and protect the interest of the clients, and in all to lay a strong and sound legal foundation in order to form a good and ordered accounting profession and market.