Legal Risks And Its Prevention On Mergers Of Accounting Firms In China

After joining the WTO, the opening degree of China’s accounting market has increased significantly. In the face of the new mode of international competition, a large number of accounting firms with international level appear in our country. Under the pressure, more and more local accounting firms begin to merger. But at present the majority of firm’s mergers are to satisfy certain conditions, to appear without conducting a detailed theoretical study before the merger, combined with lacking of internal governance measures, and therefore to a certain extent which caused the legal risks of combination. Therefore, in the background, rational-depth analysis on the current situation of accounting firm’s merger and its legal risks has great theoretical and practical significance for achieving our local accounting firm’s scale and legalization by merging.The merger of accounting firm means that two or more than two accounting firms merge into a single reporting entity, In the event of a legal dispute, the merger of accounting firms must bear legal responsibility. Legal risk of accounting firm merger is divided into civil liability risk, administrative penalties and criminal liability risk. According to the analysis on the current status of the law, the risk is mainly involved in the civil liability and administrative punishment, the risk of criminal responsibility is relevant low. There are many assessment methods to evaluate the legal risk, but the merger of accounting firm includes event tree analysis, value at risk and risk compensation method, the three evaluation methods have their own advantages, they can be used according to the specific situation. During the process of the accounting firm’s merger, we can use risk compensation method to determine the feasibility of the merger. After the merger, we can use value at risk to evaluate the legal risks which we have found, then we need to measure the biggest loss of the legal risks. If the loss is more than expected, we should use event tree analysis to determine legal risk point and risk source, then we list the specific risk and grade the risk level. Then we begin to do scientific research and make the necessary preventive strategy. For the consolidation of accounting firm to guard against legal risks, we should take the measures according to the situation. Only in this way, the risk can be detected in the early part, thus we can achieve effectively cope with the first time.The situation of legal risk caused by the merger of accounting firms is very complex, false statement or the failure to meet the requirement of creditors to pay off debt before the merger will bring legal risks. In the merger process, important files were not saved, original merged objects due to distribution and transfer of property as well as the firm failing to complete the change of legal proceedings which may bring the risk to accounting firms. After the completion of the merger, the change of company organization form from the limited liability to the partnership, and the weak audit quality will increase the legal risk of accounting firms. In view of these legal risks, the reason may include two aspects firm itself and external supervision. The firm itself is lack of a comprehensive feasibility study and effective integration after the merger, external supervision mainly includes scattered merger law, and lacking of enough emphasis on quality control from government departments, industry associations of self-discipline and the continuous monitoring to the problems of merger from judiciary. About these two reasons, the firm itself is the dominant factor, external supervision is the environment factor. If two aspects are nice, the prevention work of legal risk in accounting firm’s merger will become easy.By analyzing the causes on the legal risks of accounting firm’s merger, and based on the experience of Deloitte’s merger, we put forward the related countermeasure on the legal risks existing in our country’s merger of accounting firm. The reason why we learn from the Deloitte is that it has a long history of the merger, after continuous merger, Deloitte has established a global reputation of the brand image, these achievements are inseparable to the prevention of the legal risk. Deloitte is very concerned about the legal risks of the merger, not only it pays attention to the feasibility study before the merger, but also strengthens the integration of audit quality and internal governance mechanisms after the merger. Therefore, according to the present situation of legal risk in local accounting firm’s merger, combined with experience of legal risk prevention from Deloitte, we can summarize some measures. From the firm itself, firstly it needs to conduct a comprehensive feasibility study on accounting firms from the objective and historic legal risk, then prefer to choose special-general partnership after the merger, and finally integrate the standards of practice, organizational structure, corporate culture and internal governance mechanisms effectively. From the external supervision system, the measures mainly include the improvement of laws and regulations of accounting firm’s merger, strengthening quality control by government departments and industry association self-discipline. We need to establish application system of the merger to prevent the legal risks of accounting firm’s merger. In this way, we will continue to decrease the legal risks of accounting firm’s merger.