A Study On The Civil Liability Of Chinese Registered Accountants

Since90s’of the20th, many CPAs and their accounting companies have been sued in more cases. Some of the cases made legislative authorities launched new laws-Enron case is an example."Sox Act" was directly made because of Enron case. This act was made to rebuild investors’confidence on capital market. The Guangxia(Yinchuan) industry case and Hisense Kelon case in China has also triggered warm discussion through all level of the society.Because the development of capital market and entity’s short-eye behavior, nowadays, High frequency of cases of this sort is never occasional. As the development of capital market and entity’s short-eye behavior also exit in our economy, more focus need putting on the legal liability of CPAs.China is a developing county with high developing economy. To become a developed country, improvement in every aspect must be made. Improvement in study and judicial exercise on CPAs’civil liability also must be made.Each case, which splashed in auditing and law-study field, could bring brain-storm to their scholars, especially in China, around2002. Among the study and discussion, there are many papers talking about case analysis. As auditing service in our country still does not have long history, cases related to CPAs are not so diverse and we still have influence from government. However, with the high development of our economy, cases relating to CPAs have surged. Some of the cases are the ones that the law profession never met. In2006, PWC was sued at the court of arbitration by Shanghai Waigaoqiao Free Trade Zone Development Co., Ltd. And this case popped several questions:In this sort of case, should PWC bear liability? If yes, what sort of legal liability should PWC bear, especially in the current situation that there’s no actual audit consignor? In which condition and to what degree CPAs should take up their responsibility to the management board? This paper deeply analyzes Shanghai Waigaoqiao Free Trade Zone Development Co., Ltd V.S PWC case and HT-SAAE vs. Deloitte case, with the theories which are related to CPAs’legal liability. Also, this paper includes a similar foreign case in order to make a comparison between internal ones and overseas ones. With the hope of providing valuable reference to following similar cases, this paper was written.This paper divides civil legal liability into liability for Breach of Faith and tort liability according to Gaius’"The Institutes of Justinian". This paper deeply analyzes Shanghai Waigaoqiao Free Trade Zone Development Co., Ltd V.S PWC case and HT-SAAE vs. Deloitte case, with the theories which are related to CPAs’ legal liability. Also, when this paper analyzes the cases, the actual Justinian situations of our country were taken into consideration. Through all the analysis, this paper gives answers to the above questions and the writer also gives conclusion. When CPAs made mistake or did not put enough attention during there auditing, they should bear liability for Breach of Faith but not liability of tort. Meanwhile, in some cases, the judges make CPAs and their auditing companies bear liability to manager board of their customers. The writer makes the point that this situation is caused by inappropriate audit entrustment. When audit entrustment goes better in future, this inappropriate judicial result would not happen.This paper could be divided into6chapters. Chapter1is the introduction; chapter2talks about literature review; chapter3and4separately tell about study hypothesis, some blurry definition, theory frame and the actual legal situation of our country; chapter5deeply analyzes the two internal cases and the one overseas case; while chapter6is the conclusion of this paper and the writer’s advice.What’s new in this paper is that it uses the currently popular theory which is related to the civil liabilities of CPAs to deeply analyze and answers the new questions which happened in auditing practices. However, because the writer of this paper is lack of fruitful storage of law and auditing practice, the analysis in this new phenomenon is not so deep enough. Some of the solutions sound a little utopia. The writer faithfully hope you, the readers could make criticism. Thank you for your reading.