Laws of the People's Republic of China

(Promulgated by the State Council on 3 July, 1986)

CONTENTS

CHAPTER I GENERAL PROVISIONS

CHAPTER II EXAMINATION AND REGISTRATION

CHAPTER III SCOPE OF SERVICES

CHAPTER IV RULES OF WORK

CHAPTER V THE PUBLIC ACCOUNTING FIRM

CHAPTER VI OTHER PROVISIONS

CHAPTER I GENERAL PROVISIONS

   Article 1. The present regulations are worked out in accordance with the Article 5 and Article 20 of the Accounting Law of the People's Republic of China in order to strengthen the regulation over the Certified Public Accountants and bring into play their role in social economic activities.

   Article 2. Certified Public Accountants are persons approved by the State to practise auditing, accounting verification and accounting consultancy.

The law of the State protects the Certified Public Accountants in their independent practice.

   Article 3. The working institute of Certified Public Accountants is the public accounting firm before he can accept an engagement to render the services to be performed by Certified Public Accountants as provided by laws and regulations.

   Article 4. The regulatory authority at national level of the Certified Public Accountants and the public accounting firms is the Ministry of Finance. For local level, the regulatory authority shall be the department or bureau of public finance of a province, an autonomous region, or a municipality directly under the Central Government.

   Article 5. An institute of Certified Public Accountants shall be organized by Certified Public Accountants in order to maintain the legitimate professional interests of the Certified Public Accountants, exchange working experiences and enhance the association between Chinese Certified Public Accountants and their foreign counterparts.

CHAPTER II EXAMINATION AND REGISTRATION

   Article 6. A Chinese citizen who loves the People's Republic of China, supports the socialist system, is a college graduate or a person with the equivalent academic education, has worked in accounting or auditing field for more than three years, may apply and sit for the examination of Certified Public Accountants.

Exemption from the examination may be granted, after qualified through evaluation, to an applicant who has been in the position of a senior accountant, to an applicant who has been an accounting professor, research fellow or associate research fellow and has practical accounting experience or to an applicant who has had college or equivalent education, or has equivalent academic ability, has pursued financial or accounting career for more than twenty years and does have professional accounting expertise.

   Article 7. The examination and evaluation of Certified Public Accountants shall be directed, organized and supervised on an uniform basis by a national examination board which shall be formed with the approval of the Ministry of Finance. The responsibility of implementation shall be taken by the examination board formed with the approval of a provincial public finance department or bureau.

The procedures of the examination and the evaluation shall be formulated by the Ministry of Finance.

   Article 8. A candidate of a Certified Public Accountant who is qualified through examination or evaluation shall be reported by the public accounting firm he or she has applied to join to the Ministry of Finance or the provincial public finance department or bureau for approval and registration. A Certified Public Accountant approved for registration by a provincial public finance department or bureau shall be reported to the Ministry of Finance for the record. If the Ministry of Finance finds an approval inappropriate, it shall inform the relevant public finance department for reconsideration.

The Ministry of Finance prepares and issues, on a uniform basis, the certificate of Certified Public Accountant to the Certified Public Accountants approved for registration.

   Article 9. If a Certified Public Accountant is leaving the public accounting firm he belongs to, the public accounting firm shall report to the public finance agency in charge for approval and return his certificate of Certified Public Accountant to the public finance department. If he wishes to join a public accounting firm once again to practise professional services, new application for registration can be made according to the stipulations.

   Article 10. No staff currently working in the governmental agencies may be registered to practise as a Certified Public Accountant.

CHAPTER III SCOPE OF SERVICES

   Article 11. The Certified Public Accountants render the following services in auditing and accounting verification:

1. Examination of accounting records, accounting statements and other financial information, and issuance of auditing report;

2. verification of paid-in capital of an enterprise and issuance of capital verification report;

3. participation in handling the liquidation affairs for the dissolution and bankruptcy of the enterprises;

4. participation in conciliation of economic disputes, assistance in verifying evidences of economic lawsuits;

5. other matters of auditing and accounting verification.

   Article 12. The Certified Public Accountants render the following accounting consultancy services:

1. design of financial and accounting system, serving as accounting consultants, providing consultancy services in accounting, finance, tax, and business management;

2. agency service in tax declaration;

3. agency service in application for registration, assistance in drafting contracts, articles of association and other commercial papers;

4. training of financial and accounting personnel;

5. other services in accounting consultancy.

   Article 13. Governmental agencies, enterprises, nonprofit organization and individuals may engage Certified Public Accountants for the services specified in Article 11 and Article 12 of the present regulations.

A client who engages Certified Public Accountants for services shall pay for the services.

   Article 14. When accepting engagements from governmental agencies, the Certified Public Accountants have the right to access and review financial and accounting information and other relevant documents, to inspect the field and facilities of the business, to make investigation and verification by inquiring the relevant units and individuals, according to the need of the engagement.

When accepting engagements from other clients, the access and review of information and documents and the relevant investigation shall be made according to the arrangements in the engagement letter legitimately signed.

CHAPTER IV RULES OF WORK

   Article 15. In performing professional work, a Certified Public Accountant must observe the relevant rules in State laws and regulations and take the relevant agreements, contracts and articles of association as the basis.

   Article 16. A Certified Public Accountant shall scrupulously abide by the principles of fairness and objectivity and of seeking truth from facts and shall be responsible for the correctness and legitimacy of the contents of the report issued.

   Article 17. A Certified Public Accountant shall avoid from services to any client if there is any relation or conflict of interests between them and shall indicate the situation to the firm. The client or other relevant person has the right to ask for his voidance.

   Article 18. A Certified Public Accountant shall keep strictly the confidentiality of the data and information obtained or accessed in performing services.

   ARticle 19. A Certified Public Accountant shall indicate the situation clearly in the report issued when he finds fabrication of information, fraud for personal gain or other violation of the State laws or regulations. Client's request for unreal or inappropriate attestation shall be rejected.

   Article 20. If a Certified Public Accountant violates the rules of work and brings about harmful effects, the public accounting firm shall make a faithful report and the public finance agency in charge shall give him the following sanctions according to the cases:

1. warning;

2. fine;

3. provisional prohibition from practice;

4. revocation of the certificate of Certified Public Accountant.

A Certified Public Accountant who violates the criminal law shall be submitted to the judicial authority for punishment according to the law.

   Article 21. If a Certified Public Accountant is in fact not suitable for the position, the public finance agency that approves the registration shall cancel his registration, revoke his certificate of Certified Public Accountant and report to the Ministry of Finance for the record.

CHAPTER V THE PUBLIC ACCOUNTING FIRM

   Article 22. A public accounting firm is a non-profit organization approved by the State to accept independently the engagements of the services of the Certified Public Accountants according to the law.

A public accounting firm shall balance its revenue and expense by itself, make independent accounting and pay taxes according to the law.

   Article 23. The establishment of a public accounting firm shall be reported to the Ministry of Finance department or to a provincial public finance or bureau for review and approval. The provincial public finance department or bureau that gives approval to the establishment of a public accounting firm shall report the firm name, the articles of association and the persons in charge of the firm to the Ministry of Finance for the record.

A public accounting firm established after approval shall make registration with the local administration of industry and commerce. It may start business only after the business licence is obtained.

   Article 24. The services to be rendered by a Certified Public Accountant must be accepted by a public accounting firm on a uniform basis. A report issued by a Certified Public Accountant shall be signed by himself and be sealed by the public accounting firm.

A public accounting firm may accept engagements in other administrative areas.

   Article 25. The public accounting firm shall collect, on a uniform basis, the fee for the services rendered by Certified Public Accountants. The criteria of service fee shall be worked out by provincial public finance department or bureau together with the relevant agency and reported to the Ministry of Finance for the record.

   Article 26. The Ministry of Finance and the provincial public finance departments or bureaus are responsible for supervision over the business of the public accounting firms. The public accounting firms shall report regularly their business development, revenue and expenditure, personnel change, etc., to the public finance agencies in charge.

   Article 27. If a public accounting firm violates the stipulations in the present regulations, the public finance agency in charge may, according to the gravity of the cases, give the firm sanctions, such as warning, fine, suspension of business for reorganization or compulsory dissolution, etc.

   Article 28. When a Certified Public Accountant comes across the client's financial receipts and payments incurred abroad, the public accounting firm may engage a foreign public accounting firm having a representative office in China for local examination and written attestation.

CHAPTER VI OTHER PROVISIONS

   Article 29. The interpretation of the present regulations is the responsibility of the Ministry of Finance. The Ministry of Finance shall work out rules for the implementation of the present regulations.

   Article 30. The present regulations shall be effective as of 1 October, 1986.