Supreme People's Court, Several Provisions on the Trial of Cases Involving Civil Tort Compensation in Connection with Audit Activities by Accounting Firms

最高人民法院关于审理涉及会计师事务所在审计业务活动中民事侵权赔偿案件的若干规定

July 02, 2007 | BY

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Accounting firms face stringent tort liability when conducting audits.

Clp Reference: 3120/07.06.11 Promulgated: 2007-06-11 Effective: 2007-06-15

Promulgated: June 11 2007
Effective: June 15 2007

Main Contents: If a certified public accountant is characterized by any of the circumstances set forth below in the course of audit activities and issues an untruthful report, thereby causing a materially interested party to incur a loss, the accounting firm and the audited work unit shall be deemed to be jointly and severally liable:

(1) he/she maliciously colluded with the audited work unit;

(2) he/she was well aware that the accounting treatment of material events by the audited work unit conflicted with relevant state provisions but failed to indicate the same;

(3) he/she was well aware that the accounting treatment by the audited work unit would directly harm the interests of the materially interested party, but concealed the same or reported the same untruthfully;

(4) he/she was well aware that the accounting treatment by the audited work unit would lead to a material misunderstanding by the materially interested party, but failed to indicate the same;

(5) he/she was well aware that the accounting statements of the audited work unit contained untruthful content concerning material events, but failed to indicate the same; or

(6) he/she was instructed by the audited work unit to prepare an untruthful report, and did not refuse to do so (Article 5).

Related Legislation: PRC General Principles for Civil Law, Apr 12 1986; PRC Certified Public Accountants Law, Oct 31 1993;PRC Company Law (Amended), Oct 27 2005, CLP 2005 No.10 p.21; and PRC Securities Law (Amended), Oct 27 2005, CLP 2006 No.1 p.31

Full Translation & Bulletin: See pages 76 and 83

clp reference:3120/07.06.11prc reference:法释 [2007] 12号promulgated:2007-06-11effective:2007-06-15

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