Article 14 Only CPAs may undertake the following professional auditing activities:
- Examining the financial statements of an enterprise and issuing an auditing report;
- Verifying the capital of an enterprise and issuing a capital verification report;
- Performing audits related to any merger, splitting or liquidation of an enterprise, and issuing relevant reports;
- Performing other auditing activities as established in the laws and administrative regulations.
Article 15 A CPA may undertake accounting consultation and other accounting related service activities.
Article 16 Any assignments undertaken by a CPA must be accepted by the accounting firm to which such CPA belongs, and the contracts of assignments must be signed by that firm and the clients.
The accounting firm assumes all civil liabilities for any professional services undertaken by any CPA associated with the firm.
Article 17 A CPA in the execution of his professional activities may investigate according to the necessity of the situation, the client’s relevant accounting information and documents, examine the client”s business site and facilities, and require his client to provide necessary assistance.
Article 18 A CPA who has a conflict of interest with or a financial interest in a client must avoid dealing with that client. The client also has the right to require such an avoidation.
Article 19 A CPA has the responsibility to keep the business information he acquires in the performance of his services confidential.
Article 20 A CPA shall refuse to issue any relevant report where:
- A client suggests overtly or covertly that a false or misleading report or statement be issued;
- A client intentionally fails to provide relevant accounting information and documents;
- The report to be issued by a CPA cannot correctly present the material items of financial information due to a client”s other unreasonable demands.
Article 21 When performing auditing services, A CPA must issue reports pursuant to the procedures as determined in the professional standards and regulations.
A CPA may not commit any of the following errors or commissions in the performance of an audit or the issuance of a report:
- Omitting any fact of variance between a client”s financial and accounting treatments in material items and the State regulations, provided the CPA is fully aware of such fact;
- Issuing an untrue report or a report which fails to disclose the fact that a client”s financial and accounting treatments will damage the interests of the users of the reports or other related parties, provided the CPA is fully aware that the report is untrue or that a material fact has not been disclosed;
- Issuing a report in which a client”s financial and accounting treatments will be misleading to the users of the report or the persons who have interest in the report, provided the CPA is fully aware that the report is misleading;
- Issuing a report in which the material items of the financial statements are materially untrue, provided the CPA is fully aware that any such statements are materially untrue.
A CPA shall be liable for the behavior listed in the above items only if he or she should know the situation under the professional standards and rules.
Article 22 A CPA may not:
- Purchase or sell the stock bonds or other properties of an audited organization or individual during an audit;
- Solicit or accept compensation of any sort beyond the agreed upon price, or try to obtain any other interest by taking advantage of the position of auditor;
- Accept the assignment of collecting a client”s receivables;
- Allow others to execute professional activities in his or her name;
- Execute professional activities with two or more accounting firms;
- Solicit business by advertising or publicizing his or her professional qualifications;
- Conduct other activities contrary to the laws and regulations.
Article 23 An accounting firm can be established by two or more CPAs in partnership.
The partners are responsible, with their property as security, for the liabilities of the accounting firm held in partnership in proportion to the amount of capital each partner contributed to the firm, or as provided in the partnership agreement. The partners have joint liability for the firm”s liabilities.
Article 24 An accounting firm which conform to the following conditions can be a legal entity with limited liability:
- With a registered capital of not less than 300 000 Yuan;
- With a number of full-time professional staff and at least five of them are CPAs;
- Conforming to the scope of professional activities and other conditions as stipulated by the Finance Department of the State Council.
An accounting firm with limited liability is responsible for its liabilities with all its assets.
Article 25 The establishment of an accounting firm should be approved by the Finance Department of the State Council or the finance department of a province, an autonomous region or a municipality directly under the central government.
To apply for the establishment of an accounting firm, the applicant must submit the following documents to the organization that examines and approves the application:
- Application report;
- Name, organization structure and business location of the accounting firm;
- The constitution of the firm. If the firm has a partnership agreement, the partnership agreement should be attached;
- List of the names of CPAs, their resumes and other relevant supporting documents;
- List of the names of the principals, partners of the accounting firm, their resumes and other relevant supporting documents;
- Capital verification report of the accounting firm with limited liabilities;
- Other documents as required by the organization that examines and approves the application.
Article 26 The organization that examines and approves the application should decide whether the application should be approved within 30 days from the date of the receipt of the application documents.
The finance department of a province, an autonomous region or a municipality directly under the central government shall record the approval of an accounting firm with the Finance Department of the State Council. In case the Finance Department of the State Council discovers that the approval is improper, it must notify the organization where the original approval was made and require a reexamination within 30 days from the date of the receipt of the record.
Article 27 The establishment of a branch office of an accounting firm must be approved by the finance department of a province, an autonomous region or a municipality directly under the central government where the branch office is located.
Article 28 An accounting firm shall pay tax pursuant to the law.
An accounting firm shall establish a fund for professional liability or purchase a professional liability insurance policy, pursuant to the regulations promulgated by the Finance Department of the State Council.
Article 29 An accounting firm may accept an assignment independently of the administrative or industrial jurisdiction except to the extent of any limitations in any other laws or regulations.
Article 30 No organization or individual shall interfere in an organization”s choosing an accounting firm for professional services.
Article 31 The stipulations in Articles 18 through 21 of this law shall also be applied to accounting firms.
Article 32 An accounting firm shall not violate any provisions of items 1-4, 6 or 7 or article 22 of this law.
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