Some Understandings On The Development Of CPA Industry

Organization forms of CPA firms

At present, the main form of organization of CPA firms is limited liability company system, partnership system and limited liability partnership system.

A partnership's CPA firm consists of two or more than two registered accountants, who are jointly and severally liable for the debts of the firm with their respective private assets.

It helps to expand the size of the firm and improve the risk aversion ability, but the biggest drawback is that any partner's failure will make other partners liable for unlimited joint and several liability.

The limited liability partnership originated in the early 1990s. It means that CPA firms have limited liabilities for their debts with all assets, and each partner bears unlimited liability for individual behavior and other persons under supervision.

Under this system, partners only assume unlimited liability when they are related to irregularities. Other partners only assume limited liability. This form combines the advantages of partnership and limited liability company system, and abandons its shortcomings.

At present, the "four big" businesses are limited liability partnership, and many large and medium-sized firms are starting to pform.

The limited liability company has limited liability to the accounting firm by subscribing shares.

In accordance with the provisions of the registered accountants act, China will only establish limited liability system and partnership system. The partnership CPA firms are mainly distributed in Shenzhen, and about ninety percent of the firms employ limited liability system.

At present, the minimum registered capital of CPA firms in China is 300 thousand, that is, most firms have only 300 thousand violation compensation, and huge economic benefits tend to make CPA chase profits, which is not conducive to the audit of accountants.

From this point of view, the organization form of unlimited liability should be the inevitable choice for CPA industry to establish honesty and integrity. Under the current situation of CPA's low quality and professional competence needs to be perfected, the joint and several liability of partnership will be deterred by many partners. Therefore, adopting limited liability partnership is not only a choice, but also conducive to integration with the international trend.

The bankruptcy of Enron Corp and the downfall of Adachi Nobu have refocused people's attention on whether accounting firms can carry out certification and management consulting services at the same time.

The management consulting service of CPA firm has expanded rapidly in recent years, and the revenue from management consulting service is much higher than that of its audit services.

Later, the outbreak of Enron caused widespread public belief that the main culprit lies in the integration of audit and management consulting services.

And management consulting services.

The argument can be traced back to the point that Motz and Sharraf, a famous auditor, put forward in 1961: "the expansion of management consulting business will inevitably bring negative effects on audit independence".

However, a large number of empirical studies have shown that there is no obvious evidence to support this judgment. Many research results think that non audit services will not only affect audit quality, but also help improve audit independence. Management consulting service can deepen CPA's in-depth understanding of customers, reduce risk, expand revenue and expand professional competence.

In fact, Mozi and Xia have offered advice: "whoever is advocating the prohibition of independent public accountants to conduct management consulting services is wrong."

At the same time, if public accountants are free to carry out this activity without restraint, it is also dangerous.

Professor Li Ruoshan also holds that: "legally prohibiting accounting firms from engaging in management consulting services is not the best institutional arrangement, so that the market may play a role."

The CPA industry is an intermediary agency. Customer trust is the basis of its existence. Only substantive independence and no form independence still can not get investors' approval. Before the regulatory regulations are promulgated, accounting firms have already adjusted their business structure under the pressure of the public media and market demand, and some large accounting firms have split up management consulting business.

In view of China's specific circumstances, the author thinks that auditing and management consulting are not separated well, because the consulting business volume and business income of China's CPA firms are generally not large, and the conflict between them is not obvious.

Moreover, the CPA industry in China is currently single in business, small and scattered in scale, and accounting for more than 95% of total revenue. In the face of competition among major international accounting firms, it is necessary to encourage them to vigorously expand new advisory services and expand the size of the firms.