Consummating Measures For The Improvement Of CPA Professional Liability Insurance System

If accounting firm has bought CPA professional liability insurance policy, the insurance company is liable to pay for the loss to client or the interested parties, which is caused by the unintentional act or fault of the insured and is falling under the liability of CPA. In the first and second part of this paper, fund of audit venture is discussed and its defects are pointed out, such as disproportions between fund and income, low-level liquidity. However, CPA professional insurance is proposed which can overcome the defects. With audit risk growing inevitability and the change of competition environment, CPA professional insurance enables enterprises to decrease audit risks and forge competition advantages.CPA professional liability insurance developed fairly late in our country and the development of liability insurance market in our country was. relatively slow. The coordinated development of both insurant and insurer is faced with many difficulties, such as low premium income, weak consciousness of insurance, small scale of insured, and underdeveloped operating technique in CPA liability insurance. Further study on low development of the CPA liability insurance shows concrete causes presented below. Firstly, law system is not perfect. The Corporations Law and the Securities Law have provided different principles to accounting firm in the stock market. A claimant is entitled to take civil action to accounting firm only after the administrative punishments have been meted out. Secondly, the corporate capacity has given rise to two more important characteristics of the LLC:the limited scope of compensation and the limited amount of compensation. The structure of LLC is inadequate. Thirdly, the identification of negligence behaviors is difficult, such as identification of intentional act from negligence; identification of gross negligence from minor fault. Fourthly, some insurance clauses are defective. For example, the interested parties were not prescribed or clearly prescribed and the range of coverage afforded by CPA insurance policy was narrow.The theorists and practice circle reach an agreement over the possible reform options which focus on coordinating the Corporations Law and the Securities Law. Accounting firm shall bear joint and several responsibilities if they have issued an untruthful report even though they knew or should have known the falseness. However, accounting firm who causes losses with a fault or negligence shall bear the supplement of the impingement liabilities. At the same time, with the establishment of committee of appraisal of professional liability, the victim can bring a civil lawsuit to the court. The theorists and practice circle also agree to advance the accounting firm reform and implement the form of partnership organization in which way to strengthen moral restraint of chartered accountant. I am of the view that these reforms are only a matter of time and don’t make it profound.Essentially, the identification of negligence behaviors is the basis of civil liability system, and also the basis of CPA professional insurance market. To research the identification, it must research the every side of the negligence behaviors. Legal Identification Criterion of negligence behaviors is too short to understand, especially containing a sum of audit technical terms. By the way. audit judgments exist in all the audit processes and auditing is a process that is occupied by continuous judgments. So the identification of negligence behaviors is too difficult. The fourth part expounds the affirmance on the CPA civil liability of intentional act or negligence act (which refers to gross negligence and minor fault). In order to prove the practice of affirmance, we analyze the criteria for identification and the process of audit. Furthermore, the paper applies it in"Tianjian CPAs Unsuccessful Cases"As consensus has been achieved, such as the insurer shall specify the scope of the interested parties and extend the range of coverage afforded by CPA insurance policy, we make a substantive progress in solving pendent trouble. Our results show that as for which liability subjects are proper and types of liability insurance is more appropriate, there are different answers from the academic field, and the controversies still continue. So the fifth part discusses the theoretical basis of its choice to put forward possibility policy suggestions.How to solve those difficult situations is a hard nut for the CPA professional liability insurance to crack. By analyzing the reasons of poorly motivated participants in CPA professional liability insurance market, this article proposed several preventive suggestions. This article directs the orientation of the struggles clearly without further discussion when the agreements have been reached. However, I make it profound when the issues are still controversial, such as which the liability subject is proper and which type of liability insurance is more appropriate. The approach of the paper is essentially pragmatic. As for the innovation of this text, the analysis of application to Legal Identification Criterion in CPA professional liability insurance is made under a unite framework which involves both the legal criterion and audit criterion. Meanwhile, limited by background knowledge and energy, some issues of particular concern have not been discussed, which we should give greater concern. Such as is it necessary to execute compulsory insurance to responsibility of CPAs a third party? How to design reasonable premium rates system providing the crucial balance between insurant and insurer?...