Discussion On The Construction Of Domestic Professional Liability Insurance System For CPA

The CPA liability insurance is an effective channel to transfer and diversify the CPA's professional risk, apart from CPA risk fund. During to historic and economic reasons, the CPA liability insurance appears late in China. In 1999, People's Insurance Company of China meets with the market demand, and lays down the CPA Professional Liability Insurance Clause by consulting the experiences in Asian countries and in Hong Kong and Taiwan regions. This clause is approved by China Insurance Regulatory Commission in November 16, 1999. On July 14, 2000, Shenzhen Branch, Ping'an Insurance Co. Ltd. sighs the first CPA liability insurance underwriting agreement with Shenzhen CPA Association. Later, they make a supplementary agreement to revise and supplement the insurance items. On July 20 of the same year, Shanghai Branch, Ping' an Insurance Co. Ltd. makes the like agreement with Shanghai Association, and 9 CPA offices in Shanghai including Dahua, Changjiang, Lixin etc. get insured with the insured sum of RMB52, 000,000.However, due to some reasons, the domestic CPA liability insurance develops slowly and is now in lower level no matter from the aspects of insurance awareness, the business amount, the premium or the insurance technology.Nowadays, few domestic researches are on the CPA liability insurance, no less than comprehensive and systematic monograph .The scholars mostly focus on certain aspect of the CPA liability insurance. Wang Ying discusses the demand and supply of CPA liability insurance (On American Account Scandal and Domestic CPA Liability Insurance). Li Ling adopts the game theory to analyze the reasons why domestic insurers do not prefer this cover and raises the countermeasures (On Game of CPA Liability Insurance). Li Ruoshan & Zhou Qinye (The Theory and Practice of the CPA Liability Insurance), and Guo Xiaomei (CPA's Legal Liability) respectively discuss the causations, the development and the evolvement of the CPA's Legal Liability. There are lots of studies on the countermeasures of developing the CPA Liability Insurance. Wang Baoqing suggests that it should strengthen the law enacting, improve the civil compensation system and reinforce the moral hazard prevention of professional insurance (on Countermeasures of the Promotion of Domestic CPA Liability Insurance). According to Zhang Hongtao and Wang He in their Book the Theory, Practice and Cases of Liability Insurance.This book, based on the achievement of the insurance studies, combines domestic laws and insurance practices, introduces and learns from the advanced experiences abroad, and discusses comprehensively and systematically the domestic liability insurance, among which it introduces the general situation of CPA, the civil compensation liability, and the audit liability etc. However, there is hardly any research on the modes and routes of the CPA liability insurance. Therefore, this paper, based on the feasibility of the CPA liability insurance, puts forward several countermeasures of developing the domestic liability insurance, for instance, reinforce the law enacting, better the civil compensation system, strengthen the moral hazard prevention of liability insurance, and establish the special development mode for the CPA liability insurance according to the situation of China.The whole paper is divided into five chapters. The main contents and viewpoints of each chapter are as follows:Chapter 1(the Introduction) mainly introduces the background for the research, the purpose and significance, the methods and the contents of the research. It is thought that, with the more and more important part that CPA plays in the market economy, the public begins to understand this profession and raise higher demand for the business quality, which increases the CPA's professional risk. Under this background, to study deep and systematically how to establish domestic CPA liability insurance system, and how to prevent and diversify the CPA's professional risk is a must for the development of the CPA industry and even that of the economy.Chapter 2 mainly discusses the definitions of the CPA profession and the professional liability. It firstly introduces the characteristics of the profession, the institution and CPAs' main task, then analyzes the CPAs' independent audit liability and civil compensation liability, and at last discusses the principle of culpability of the CPA's liability. According to the study, it should adopt fault liability principle when the audit legal liability system is first introduced, then revise the law and adopt the no-fault liability principle. This is because, in China, the profession of CPA appears only in recent years, and needs a long period to be mature. In view of the characteristics of the profession and the universality of the parties interested, may establish a system where the presumed fault liability principle is in priority while the fault liability principle and rigid liability principle are as assistants.Chapter 3 focuses the necessity and feasibility of CPA liability insurance. It first discusses CPAs' function in market economy and the characteristics of the professional risk, analyzes the significance and the necessity of establishing the CPA liability insurance system, and then accounts for the feasibility of establishing the CPA liability insurance from three aspects: the CPA office, the insurer and the sociality. The study shows that it is not only feasible but also significant and essential to develop CPA liability insurance.Chapter 4 mainly introduces the status quo and the problems of the CPA liability. According to the research, subject to the profitability of commercial insurers, the positive externality of the CPA liability insurance and existence of public products, simple market readjustment results in the loss of efficiency. That is "market malfunction" and demands the function of the government. The CPA liability insurance is a semi public product of positive externality. The consumer or the producer may not charge for utility of the positive externality, or may do with a higher exchange cost. Therefore, it cannot meet with the insurer's target of profit maximization. It needs support of the government, which guarantees the CPA liability insurance to develop stably, healthily and continuously.Chapter 5 introduces the experiences abroad, explores the development modes for the domestic CPA liability insurance, and put forward several countermeasures including bettering the legal system, the insurance clauses, and the limitation of liability, enhancing the CPA's professional ethics and specialty quality etc. This chapter is the key of the whole paper, It suggests, to establish a CPA liability system according to the situation of China is a great system engineering, which not only demands the insurer to develop readily marketable insurance products, reinforce the publicity of insurance, and enhance the public's insurance awareness, but also demands the account office to better the internal management mechanism and strengthen the professional risk control, more importantly, the state should give support in law and policies. Only these have been done, can the CPA liability insurance system be established to promote the development of the CPA industry as well as the economy, and can the function of "watch-dog" of the CPA be fully exerted.The main innovations of the paper are: firstly, by comparing and discussing the innovation cost and the revenue, it adopts system analyses to discuss the innovation subject, makes a cross study between economics and sociology, explores the foundation and requisites of the CPA liability insurance, and realizes the innovation in the methods and theory. Secondly, according to the real situations of China and that of the CPA industry, it brings forward the countermeasures of establishing the CPA liability insurance. Thirdly, through real cases, it analyzes the professional risk of CPA in all rounds, and integrates the theory with the reality.The shortcoming of the Paper is: as a student major in international insurance accounting, for professional restrictions I know very little about the knowledge of actuarial, moreover, due to lack of comparative data. I can't do the detailed analysis in insurance pricing. It is a key factor to establish and improve the domestic CPA professional liability insurance system, therefore, The papers in this area have yet to be improved.