What signals do the two "best of the years" transmit?, Announcement of the Ministry of Finance on the Situation: Accounting Firm | Accountant | Announcement
Recently, the Ministry of Finance conducted supervision and inspection on accounting firms registered for securities service business. The announcement stated that "the number of inspection units is the highest in history" and "the punishment intensity is the highest in history". The two "historical highs" are quite eye-catching, conveying a clear signal that the regulatory authorities maintain a high-pressure situation of "strict supervision and zero tolerance" towards accounting and auditing violations.
Screenshot of official website.
The certified public accountant industry is the gatekeeper of the market economy, playing an important role in maintaining market economic order and protecting public investment interests. However, it is not uncommon for some accounting firms and accountants to engage in illegal and irregular practices in the industry, and they are inevitably responsible for many financial fraud cases. The typical cases in this announcement exposed a series of behaviors, such as failure to maintain a proper professional skepticism attitude, ineffective implementation of necessary audit procedures, failure to obtain sufficient and appropriate audit evidence, and issuing inappropriate audit opinions. Such a professional level obviously cannot truly guard the door.
To maintain the order of the market economy and promote the healthy development of the economy and society, it is necessary to severely crack down on illegal and irregular financial and accounting behaviors, and investigate and punish cases of distorted financial and accounting information and accounting fraud in enterprises. Taking this inspection as an example, some accounting firms have been suspended from operating, their illegal gains have been confiscated and fined, and some registered accountants have their registered accountant certificates revoked or their business operations suspended. Recently, an administrative penalty decision released on the official website of the China Securities Regulatory Commission (CSRC) revealed that a certain accounting firm engaged in illegal activities such as financial statement misstatement and false records in the audit report of a listed company's annual report. As a result, the CSRC confiscated its business income and imposed a fine of several million yuan. In addition, there have been recent judicial cases where registered accountants have been ordered by the court to be added as defendants, bearing unlimited joint and several liability, facing huge fines and compensation, jokingly known as the "most expensive signature in history".
The inspection and punishment, which has been the highest in history, is not a temporary measure, and the supervision of the accounting industry will only become increasingly strict. Meanwhile, it is worth noting that despite repeated regulatory pressures, illegal accounting and auditing practices continue to emerge, some even shocking, reflecting the need for further effective responses from mechanism construction to daily supervision.
The punishment for illegal activities should be strong. Under heavy punishment, there is compliance with regulations. Overall, the punishment for financial accounting violations is still relatively light, with low administrative penalty standards and inadequate civil compensation systems. From real-life cases, there are relatively few punishments such as suspending business operations and revoking registered accountant certificates. Even if some fines are "top notch" punishments, the amount still feels like "tickling an itch", and the low cost of violating the law makes some institutions and practitioners repeatedly take risks. Only with strict regulation and heavy punishment can the deterrent power of regulation be enhanced, so that accounting firms and practitioners dare not take chances and practice strictly in accordance with the law.
Daily supervision requires joint efforts. The certified public accountant industry has a wide range of involvement, and its supervision also involves departments such as finance, securities regulatory, auditing, and even financial supervision, state-owned assets, etc., which can easily lead to situations such as "multiple dragons governing the water" and unclear responsibilities. To highlight the systematic and collaborative nature of supervision, strengthen inter departmental collaboration, improve work mechanisms, enhance regulatory efficiency, jointly maintain the order of the accounting and auditing market, and improve the quality of accounting firm audits. In addition, current regulation mainly focuses on post punishment, and there is still a lack of pre - and in-process supervision, which needs to be addressed.
Institutional construction needs to be strengthened. To establish a sound and institutionalized long-term regulatory mechanism for the certified public accountant industry, it is necessary to accelerate the improvement of relevant laws and regulations. For example, accelerating the revision of the Certified Public Accountants Law, further improving administrative enforcement measures, enriching regulatory tools, refining punishment standards, and increasing punishment intensity. It is worth mentioning that in the revised draft of the Certified Public Accountants Law, the Ministry of Finance has focused on improving the accountability mechanism, significantly increasing the cost of illegal activities. In response to the characteristics of partnership organizations, accounting firms and responsible personnel who issue false audit reports have been fined a huge amount, and effective deterrence has been achieved through severe punishment. Only by formulating and improving regulatory laws and regulations can we keep up with the needs of maintaining market order.
This year, the General Office of the Communist Party of China and the State Council issued the "Opinions on Further Strengthening Financial and Accounting Supervision", which clearly stated that it is necessary to strengthen the supervision of the quality of certified public accountants' practice, standardize industry order, and promote the healthy development of the industry. Accounting firms and other intermediary institutions must strictly fulfill their responsibilities such as audit verification and accounting services in accordance with the law, ensuring independent, objective, fair, and standardized practice. Only by adhering to the principles of "strong penetration, plugging loopholes, using strict standards, and promoting a positive atmosphere" can we better promote the healthy development of the certified public accountant industry, reduce financial fraud, and better protect the interests of investors.
