On The Tort Liability Of CPAs In Assurance Service

It is a hot issue that the CPAs bear the civil liability for issuing financial auditing reportswith false statement. The viewpoint from law and public values of society is that CPAs shouldextend their legal and social responsibility, which is disagreed by the accounting professionalswith standpoint that CPAs must take audit practice regulation as their responsibility standard.Due to varying cognitive levels for auditing features, the judges experience difficulties quiteoften in determining the civil liability of CPAs Therefore, starting with specific cases on thetort liability of CPAs in assurance service and based on the methods such as caseinterpretation and comparative reference, this paper elicits four pressing questions by focusingon the constitutive requirements and responding method of the tort liability of CPAs, and thenmakes further theoretical analysis accordingly The paper is composed of three parts:Foreword, Text and Conclusion, where the Text consists of five Sections below:Case introduction in Section one points out the debating focused questions by explainingthe cause and details of CHEN Hanbin Suing YONGDA Accounting Firm. The four followingSections are discussions for the four focused questions.Section two is the discussion on the constitutive requirements of CPAs’ tort liability.Firstly, theoretical analysis for the subjective fault, conduct requirement, causal connectionand harmful consequence is processed. Secondly, further analysis is continued to decidewhether there is tort liability of CPAs in this case. The author suggests that the defendant’sconduction meets the requirements. Next, analysis on the court decision is made to identifythat the occurrence and completeness of the defendant’s fault is the prerequisite for otherconstitutive requirements, as well as the crux for defendant’s liability of civil compensation.Section three is the analysis on the defense in the tort liability of CPAs. As a defendant,CPAs applying the defense correctly would have crucial effect on the civil compensationliability. In this section, theoretical analysis is made based on the divided opinions betweenaccounting and legal professionals for the viewpoint that how auditing regulations could beused as CPAs’ defense. With applicability issue resolved, a conclusion is made that it is moreappropriate to use causal connection as defense in this case.Section four is the discussion of responding method of CPAs’ tort liability. In this section,several current theoretical viewpoints are listed on CPAs’ tort liability and also, the mainfeatures of Chinese legislation in force are presented along with relative judicial interpretation in China. Based on those, analysis for the specific case is carried out to propose that thedefendant should undertake the supplementary liability of compensation instead of jointliability, and emphasize that the judicial verdict should explicate the types of liability whichthe defendant would take.Section five is the discussion of compensation for damage of CPAs’ tort liability. At first,analysis is made for principle and limit of compensation. Next, how the defendant shouldcompensate in this case is analyzed to elicit that it is reasonable to confine the principle ofcompensation properly, based on the standpoint of equitable distribution of investment risk,and the prosecutor’s damage must be subject to actual loss.