The Fault Identification Of Accounting Firm In The False Statement Of Securities

In the securities market,securities service agencies collaboratively play the role of verifying issuers’ information and protecting investors’ interests.Accounting firms that provide securities audit services are connected to market investors because of their independent status and valuable reputation,and are also exposed to legal risk because of their audit opinions that can easily have a material impact on investors.The enhanced scope and strength of accountability under the changes to the new Securities Law has increased the audit risk faced by accounting firms and made the penalty mechanism more severe.Liability for securities misrepresentation belongs to the scope of tort law,and the fault element is one of the constituent elements of tort liability.Article 163 of the Securities Law adopts the presumption of fault as the principle of imputation,but only provides in principle,so the form and standard of fault are not clear yet,resulting in the lack of a unified trial logic in practice.The court’s treatment of the presumption of fault directly and the application of absolute joint liability has been questioned,and the trial progression of matching the degree of fault with the assumption of liability prevails.In addition,the accounting and legal fields have different views on the starting point and connotation of audit propriety.Thus,the definition of fault is an issue of research value in civil liability of the false statement of securities.Article 13 of Certain Provisions on Misrepresentation limits the scope of fault in the Securities Law.In trial practice,the tort of intentional misrepresentation is easy to judge and not typical,and it is more common for accounting firms to be held liable for negligence.In practice,a logic of fault determination has been formed with the code of practice of accounting firms as the objective standard of conduct and professional prudence as the reference standard.In some cases,the degree of fault determines the degree of responsibility,showing intentional and gross negligence corresponds to absolute joint liability,general negligence combined with causation corresponds to the limited liability,in line with the concept of equal punishment.According to the performance effect of the duty of care,negligence can be divided into general negligence and gross negligence,and the procedural defects caused by minor negligence can not be held responsible.On the whole,the reasoning process tends to rely on the previous judgement to confirm the conclusion,and the independent judgment of the court is not clear.The vagueness of the state of negligence’s boundary also leads to unclear arguments in the judgement documents,so the concretization of the duty of care becomes a judicial challenge.Duty of care under the audit responsibility is the focus of the judgement.In terms of standards,the duty of care takes the reasonable person standard as an objective criteria,which means that the behavior of the average practitioner in the industry under similar circumstances is used as the basis for evaluation.Due to the inherent limitations of auditing and limitations of definition,accounting firms are unable to obtain absolute assurance and are required to exercise reasonable care in their practice.The regulation of an accounting firm’s negligence is limited to the scope of its duty to exercise special care in professional areas and general care in non-specialized areas.The duty of care is a result-oriented objective tool,but as a general provision,the content of the duty of care is uncertain and ambiguous,and incorporates the discretion of the court to regulate the value of the norm,so the subjective will of the judge is reflected.In order to cut down the panic in the accounting industry about the amount of civil damages being abnormally high compared to the audit commission,objective reference factors can be constructed to concretize the negligence review.The audit materiality level can be used as a reference tool for determining the degree of negligence,such as whether the misstatement value reaches a specific percentage or amount.The complex and extensive audit activities can also be condensed into abstract review elements,and conclusions can then be drawn based on the facts of the case by comparison.For unresolvable professional auditing issues,external auditing experts can be brought in to strengthen the objective evaluation of the performance of obligations.The court may request the intervention of a judicial accounting appraisal to identify disputed facts and fill professional gaps.