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In order to further clarify the guiding ideology, scope of duties and the relevant requirements for the competent departments of finance to carry out administrative supervision and inspections, and to impose penalties (hereinafter referred to administrative supervision) upon the CPA profession, build up a high-efficiency and orderly administrative supervision mechanism, we hereby notify as follows some issues concerning earnestly implementing the duties of administrative supervision over the CPA profession by the competent departments of finance: I. THE GUIDING IDEOLOGY AND THE SCOPE OF DUTIES (1) The administrative supervision conducted by the competent departments of finance over the CPA profession should start from guaranteeing the healthy development of the CPA profession, and aim at restoring the confidence of the public towards the CPA profession. The said departments should also, by imposing aggravated punishments on a few acts of violating laws or rules, protect most of the honest and law-abiding certified public accountants and accounting firms, rectify and regulate the accounting order, as well as promote and guarantee the healthy development of the CPA profession. (2) The supervision and inspection institutions of the competent departments of finance should be responsible for the administrative supervision over the CPA profession, monitor the practicing quality of the CPA profession, lawfully inquire into, investigate, inspect, deal with and punish the acts of violating laws or rules, and do a good job of coordination and guidance. a. The Supervision and Inspection Bureau of the Ministry of Finance should be responsible for the overall planning, policy research and supervisory guidance of the administrative supervision over the CPA profession nationwide, and directly carry out or arrange for key inspections and penalties within the whole country. b. The supervision and inspection institutions of the competent departments of finance of all provinces, autonomous regions, and municipalities directly under the Central Government (hereinafter referred to the competent departments of finance at the provincial level) should be responsible for the administrative supervision over the CPA profession within their respective jurisdictions. A competent department of finance below the provincial level may, upon authorization of the competent department of finance at the provincial level, carry out inspections on accounting firms, but the power to deal with or penalize the CPA profession should be uniformly exercised by the competent department of finance at the provincial level or above. The problems existing in trans-provincial practice by accounting firms should be settled through negotiation by the competent departments of finance at the provincial level of the two regions, while the cases not agreed upon by the said departments through negotiation or the major cases should be reported to the Ministry of Finance for coordination and settlement. c. The financial supervisory commissioners' offices dispatched by the Ministry of Finance in all provinces, autonomous regions, municipalities directly under the Central Government, and cities directly under state planning (hereinafter referred to supervisory commissioners' offices dispatched by MOF in all regions) should, upon authorization of the Ministry of Finance, carry out supervision and inspections over the CPA profession selectively and with emphasis. II. MAIN METHODS OF SUPERVISION AND INSPECTIONS The competent departments of finance should establish step by step a supervision and inspection mechanism combining daily monitoring with key inspections. (1) The competent departments of finance should establish step by step and improve the daily monitoring systems with modernized information network technologies, realize real-time monitoring and carry out follow-up analysis on the practicing quality of the CPA profession, as well as promote the organic combination of supervision and inspections. All competent departments of finance at the provincial level should do well the following items of work: a. Collecting and cleaning up the daily monitoring information on the accounting firms and certified public accountants within their respective jurisdictions, including the basic documents, work reports, investigated and inspected particulars, and information on penalties, etc. The competent departments of finance in all regions should also set up telephones and mailboxes for offence exposure, and enrich monitoring information resources; b. Establishing and improving the information analysis system on daily monitoring. They should regularly analyze the practice of the CPA profession, and include the unusual information and doubtful points into the scope of investigations, inquiries or key inspections; c. Cooperating with the Ministry of Finance to, in light of the uniform planning of the Ministry of Finance's GFMIS, research and set up the administrative supervision network system for the CPA profession; and d. The daily monitoring information resources should be shared by the supervisory commissioners' offices dispatched by MOF in all regions. (2) The competent departments of finance should, according to the information from daily monitoring, and in combination with the complaints, offence exposures, inspections on accounting information, and documents transferred by the relevant departments, etc., emphatically supervise and inspect the auditing reports of the listed companies, the large and medium-sized state-owned enterprises, and financial and insurance enterprises, which are of major social influence to the society. They should supervise and inspect the auditing reports issued by the firms repeatedly complained or exposed, the firms with evil records of more than once, the firms that compete by obviously forcing prices down, or the firms that are next entrusted following the previous ones in consideration of no consequences, and so on. Meanwhile, the competent departments of finance should severely crack down serious illegal practice and illegal issuance of false reports. (3) In order to improve the efficiency of administrative supervision, the competent departments of finance should actively find supplementary ways for administrative supervision, such as inquiry, etc., enrich and develop the work methods and means of administrative supervision. They may inspect accounting firms at the time of investigation into the unusual circumstances and doubtful points found out in daily monitoring, and the accounting firms may provide evidence to illustrate the relevant issues. III. PRINCIPLES FOR DEALING WITH AND PENALIZING THE VIOLATION ACTS (1) All competent departments of finance at the provincial level should lawfully deal with and penalize the acts of violating laws or rules, which are committed by the accounting firms and certified public accountants within their respective jurisdictions. If any supervisory commissioners' office dispatched by MOF in a region finds out any violation of laws or rules during its inspections, it should propose specific suggestions, and report to the Ministry of Finance for uniform imposition of penalties. (2) The supervisory commissioners' offices dispatched by MOF should, when performing the penalty duties, respect the features of the CPA profession, listen to the opinions of the inspected accounting firms and certified public accountants, establish examination systems and expert demonstration systems, reasonably define accounting liabilities and auditing liabilities, and correctly distinguish the intentional violations from negligent ones. And the following must be guaranteed: the facts are clear, the evidence is conclusive, the nature is correctly determined, the legal basis is sufficient, and the punishment is appropriate. (3) If any violation of laws or rules in the CPA profession is serious enough to be subject to an administrative penalty, such administrative penalty should be imposed in accordance with the law. If any violation of rules by an accounting firm or certified public accountant is inspected and ascertained as too minor to be subject to an administrative penalty, a punishment may be imposed by means of a conversational criticism or a letter for attention, etc. However, if a case is serious and suspected to involve a crime, it should be transferred to the judicial organ for further investigation. IV. COORDINATION AND GUIDANCE MECHANISM The competent departments of finance should attach importance to coordinating the internal relationships with the external ones, earnestly avoid multi-department supervision and repeated inspections, and improve the efficiency and effect of administrative supervision. (1) Communications and coordination among the auditing department, securities regulatory department and other departments should be strengthened to avoid repeated inspections, and to form an integral supervision force. Means such as convening a joint conference, etc. may be adopted to coordinate inspection plans, and circularize inspection results. For the cases transferred by auditing or securities regulatory departments, the competent departments of finance should impose punishments by distinguishing different circumstances. The cases with clear facts, complete documents and conclusive evidence may directly enter the trial procedures; however, if the aforementioned conditions are not met, the cases should be considered clues to offence exposure for punishment. (2) The competent departments of finance should establish a mechanism for cooperation with certified public accountants associations, pay attention and give scope to the function of self-disciplinary supervision by the certified public accountants associations. They should also, in the process of imposing administrative penalties upon accounting firms and certified public accountants, send copies of administrative penalty notices and administrative penalty decisions to the certified public accountants associations, as well as strengthen resource and information sharing with the certified public accountants associations. (3) The internal offices of supervision and inspection, those of accounting management and the regulatory offices within the competent department of finance should cooperate closely, jointly establish and share the daily monitoring systems for the CPA profession. Within the competent department of finance, they should avoid multi-office inspections and penalties upon accounting firms. (4) A system of reporting administrative supervision over the CPA profession should be established. Each competent department of finance at the provincial level should, by the end of January of each year, submit the "Summing-up of Administrative Supervision over the CPA Profession" and "Summary on Inspections, and Penalties on the CPA Profession" (documents to be separately promulgated) of the last year, and the inspection plans of the current year to the Ministry of Finance. The cases on major violation of laws or rules, the typical cases, and complaints or exposures of the suspected major violations of laws or rules should be timely reported to the Ministry of Finance once they are found in the CPA profession within the involved jurisdiction. (5) A system of superintending and guiding the administrative supervision over the CPA profession should be established. The competent departments of finance should, by means of urging, assessment, inspection tour, on-site meeting and follow-up inspection of law enforcement quality, etc., guide and supervise the administrative supervision conducted by the inferior competent departments of finance. V. CONSTRUCTION OF THE SUPERVISION AND INSPECTION CONTINGENT The competent departments of finance at all levels should attach importance to and strengthen the construction of the administrative supervision contingent, select and attract professional talented people who are familiar with CPA affairs to enrich the financial supervision contingent. They should earnestly strengthen professional trainings for financial supervision cadres, encourage them to study, or to pass the examinations of CPA or lawyer qualification, etc., and to continuously improve their professional quality and work proficiency, to meet the needs in administrative supervision over the CPA profession. VI. ENLARGING THE PUBLICITY AND ESTABLISHING THE INTERVIEWING SYSTEM (1) The competent departments of finance should intensify their efforts to publicize the administrative supervision over the CPA profession and to expose the major acts in violation of laws or rules, so as to reinforce the influence, overawing and social effects of financial supervision, and to make such supervision to be able to severely punish the minority and to educate the majority, and to encourage the righteousness. (2) They should listen attentively to the opinions and suggestions of the majority certified public accountants and accounting firms, and may take various forms such as questionnaires, symposia, interviews, investigations and researches, etc. to strengthen their communications and exchanges with the accounting firms. VII. OTHER RELEVANT MATTERS The present Notice shall come into force on January 1, 2004. The working rules for the competent departments of finance to inspect accounting firms should be separately formulated. If any relevant document previously distributed for the competent departments of finance to conduct administrative supervision over the CPA profession is inconsistent with the spirit of the present Notice, it should be repealed immediately. |
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