Certified Public Accountant Civil Liability Issues Related To Research

Security market has been set up in China for decades. Thedevelopment and growing strength of China security market has greatsignificance. It has accelerated the operating mechanism conversion ofstate-owned enterprises and the establishment of modem enterprisessystem; it has promoted the industrial restructuring and rationalization ofsocial resource and so on. In short, the present China security market hasbecome a great power pushing and influencing the development ofChina's economy. On the other hand, there are still a number of problems,coexisting with great achievements. False disclosure of information is theone of them. All of these problems became especially obvious in2001.For example, on August 2, 2001, the exposure of Yin Guang Xiamanipulation deeds - resulted in unprecedentedly continuous 11 limitdowns of share price. The emergence of these problems has seriouslydamaged the legal rights and interests of most investors who areconsidered as the cornerstone of China security market. Further, itendangered the healthy development of China security market. Tracingthe actual causes, that a perfect liability system has not been establishedin China security market acts as one of them. Although there are many kinds of sanctions against illegal deeds insecurity market, it is generally considered that the adoption of civilliability system carries more practical and direct significance, because itwill be more helpful for the investors suffering losses to obtaincompensation by law and to maintain the legal interests of the investors.The main functions of China's security civil liability are to compensatelosses, to recover damages, to repair the violated security regulations, toprevent illegal activities in security market and so on. But in China there is a law tradition---valuing administrative law andcriminal law above civil law. At present, China's security civil liabilitysystem is imperfect in many aspects: the security market law system isunwholesome (lack of stipulation for civil liability) and is hard to beimplemented. The civil liability cannot be put into practice completely.Therefore, it is necessary to establish and perfect China's security civilliability system against the misrepresentation. In January 9th, 2003, theSupreme People's Court published The Regulations on the CivilCompensation Caused by the Misrepresentation in the Securities Market.It is the first systemic judicial interpretation under the civil compensationlegislation on the misrepresentation in our securities market. It offersspecific judicial criteria for the People's Court to judge the cases aboutmisrepresentation. Certificate public accountants (CPA) always took part in falsepresentation. Some accounting firms make false audit reports for avoidingbeing fired by listed companies. The public started to doubt theindependent and fair role of CPA---who is described as "the economicguard dog", the CPA vocation is face to crisis of confidence. For a longtime, the misrepresentation was only regulated by the Administrative Law.But administrative penalty is not enough for preventing illegal activities.It is necessary to establish civil liability system for CPA'smisrepresentation. The lawbreakers must bear corresponding civilliabilities when they cause the investors losses. Making use of the current legislation and judicial interpretation, thisdissertation studies the critic issues on the civil liability of CPA about themisrepresentation in the securities market, and brings forward somepoints of view. The research methods including the system comparison,the case analyses and logical analyses are applied in this dissertation.