The difference between accounting responsibility and auditing responsibility

Zhang Lianqi

In the engagement letter, it will generally talk about what auditing standards auditors should use to audit and issue reports, and also talk about what accounting standards audited enterprises should use to prepare accounting statements. Let me explain.

First of all, let's talk about the difference between accounting responsibility and auditing responsibility. The so-called accounting responsibility means that the enterprise itself should be able to prepare complete accounting statements, including all kinds of disclosures and notes made in accordance with the requirements of accounting standards, and provide relevant accounting records such as general ledger and subsidiary ledger. Audit responsibility means that auditors verify the correctness of accounting statements and records provided by enterprises. The extent of the auditor's "verification" work and what kind of inspection records are kept are all stipulated in the auditing standards. Once the auditor is in charge of the audit, he should not bear any accounting responsibility, otherwise he will check his own correctness. This kind of introspection has always been "the mouse looks at the warehouse and sees everything."

The ideal audit should be that the customer prepares the accounting statements and notes, and then the auditor starts the audit. The audit report audited by certified public accountants has only one page, which is the page of audit opinions. The following accounting statements and their notes shall be the works of the audited enterprise. In reality, there are not many customers who can do this, so auditors have to be both referees and athletes, and finish accounting statements and notes before starting auditing. Of course, the raw materials for making statements are all customers'. Is this "auditing your own work", thus violating the principle of independence?

Different countries have different regulations on this. American auditing standards believe that this is against the independence of auditors, and accounting personnel of enterprises should make accounting statements and notes. China's auditing standards may not prohibit this practice, because the overall level of domestic accountants is not high. Perhaps because of this, it is unclear whether the phrase "Don't make false accounts" inscribed by the national leaders is reminding the financial personnel of the enterprise to make accounts or reminding the auditors who only audit without making accounts.

Therefore, it is easy to understand the difference between auditing standards and accounting standards. Accounting standards first regulate the accounting and reporting of enterprises, and auditors should also learn accounting standards, so as to check the accounting records of enterprises. Auditing standards regulate the work of auditors.

Some enterprises have to prepare accounting statements in accordance with international accounting standards because they are listed overseas. Enterprises are in fact incapable of complying with international accounting standards. But this is an accounting responsibility that enterprises have to perform, and it cannot be pushed to auditors at once. Therefore, according to the requirements of China Accounting Standards and applying the format of international accounting standards, enterprises make a so-called accounting statement which is very shallow and full of loopholes and conforms to international accounting standards for auditors to audit. Once the auditors point out that there are problems here and there, the enterprise can say, then your auditors will make audit adjustments for me! In fact, this puts the accounting responsibility on the auditor in disguise. Unfortunately, in real life, there are not many such situations. Recently, the SEC requires that as long as there is a major audit adjustment, it can be considered that there is a problem with the internal control of enterprise accounting, and this problem should be disclosed. This is bad news for listed companies that are unable to prepare accounting statements according to international accounting standards or American accounting standards. I don't know how they will cope with this challenge.

As an auditor, we should not only learn accounting standards, but also master auditing standards thoroughly. Auditing standards not only standardize the wording of audit reports, but also stipulate the implementation standards of other businesses, such as how to audit accounting statements and pre-agreed procedures, and what kind of wording reports should be issued. With these regulations, auditors have rules to follow in everything they do. In the United States, the concept of law is stronger, and the establishment of any institution must have rules to follow and laws to follow.

Auditors usually do general business, and may not realize the importance of doing things in accordance with auditing standards and observing rules. But once you encounter a special business, or a business that may be sued, you realize the benefits of having laws to follow. For example, at the end of 2003, the State Administration of Foreign Exchange issued a document requiring auditors to fill in foreign exchange statements for audited enterprises and express their audit opinions on the filled-in forms. Many accounting firms have done as required by SAFE. Seriously speaking, this requirement does not distinguish between accounting responsibility and auditing responsibility. Second, any clause in the auditing standards does not stipulate the required audit opinion. What kind of inspection work is needed to express such opinions is not stipulated by the State Administration of Foreign Exchange, nor is it stipulated in the auditing standards. Therefore, this document of SAFE is a document with imprecise logic and difficult implementation. As for all kinds of strange reports that some local government agencies require auditors to issue opinions, there is no spirit of acting according to law and no logic. It's like bullying auditors.

Definition of accounting responsibility and auditing responsibility

Xu Xin

Accounting responsibility and audit responsibility are a pair of closely related concepts, which are closely linked through entrusted economic responsibility; At the same time, accounting responsibility and audit responsibility are two different concepts in the audit of certified public accountants, which involve the division of responsibilities between certified public accountants and audited units and the possible legal responsibilities. Throughout the history of countries around the world, due to the unclear definition of the two, a series of litigation cases have been triggered. For example, in 193 1, Ultramares Corp v. Tachi Certified Public Accountants; Robbins went bankrupt at the beginning of 1938 (1). It is directly related to the unclear definition of accounting responsibility and audit responsibility. With the establishment of China's socialist market economic system, China's certified public accountants are constantly developing and improving. How to define accounting responsibility and auditing responsibility scientifically and reasonably is of great significance for strengthening accounting work, developing certified public accountants in China and promoting the development of socialist market economy.

This paper attempts to distinguish accounting responsibility and auditing responsibility from different concepts, in order to provide theoretical basis for the scientific division of accounting responsibility and auditing responsibility in the practice of certified public accountants in China.

First, the theoretical source of accounting responsibility

Any subject engaged in an activity should be responsible for its activities and results, because society has given it specific rights to accomplish specific goals. Rights and responsibilities are unified, and society also requires the subject to be responsible for the result of the behavior. Accounting personnel should bear certain accounting responsibilities when using the authority entrusted by the organization to engage in accounting work, so as to ensure the realization of accounting objectives. Therefore, we might as well choose this angle to identify accounting responsibility, namely: the essence of accounting->; Accounting objectives-> responsible

1. accounting essence->; Accounting objective

Accounting is a management activity, which can be proved by the definition of management and the development of accounting function.

Management is the link that connects individuals in human organizations (collectives). It can make organizational strength greater than the sum of individual strengths in the organization, amplify the effectiveness of each individual, and produce effectiveness that individual strength does not have, thus achieving organizational goals. Management consists of five basic functions; Forecast and plan, organize and guide, supervise and control, educate and motivate, tap potential and innovate. Accounting has developed from almost primitive foreign exchange settlement bills to modern accounting. Its functions are constantly expanding, involving forecasting, planning, decision-making, supervision, control, incentives and other fields. Accounting does not passively adapt to the needs of all parties facing accounting information, but actively influences decision-making behavior by providing accounting information. Accounting deals with economic business, judges its legitimacy and economy, thus directly performing the decision-making and control functions of economic activities, and becomes the most sensitive and effective control system in modern decision-making management system. Therefore, it can be said that accounting is an important part of an open management system, and its own activities are management activities.

As accounting is a management activity, its functions in the whole activity process are reflection, supervision, control, prediction, analysis and decision-making. Accounting not only records the past, reflects the present, but also pays more attention to predicting the future (this does not depend on whether accountants require it, but is determined by the nature of accounting). The reflection and supervision function of accounting aims to record and report the economic business that happened in the past, so as to provide true and reliable accounting information, with emphasis on the past and present of economic activities. The function of prediction, analysis and decision-making of accounting is to guide future economic activities purposefully and gently, so as to make them develop in the direction of meeting the wishes of decision makers. It can be seen that the function of accounting is to achieve the following goals: ① to meet the needs of macroeconomic management; (2) to provide information for all parties concerned outside the enterprise to understand their financial situation and operating results; ③ Provide information for internal management of enterprises.

2. Accounting objectives-> responsible

Accounting responsibility can be divided into external responsibility and internal responsibility, that is, the external responsibility of accounting lies in: ensuring the authenticity, legality and integrity of accounting information; Protect the safety and integrity of assets; The internal responsibility of accounting lies in establishing and perfecting the internal control system. Internal and external responsibilities are to ensure the smooth completion of accounting objectives.

At the same time, accounting, as a management activity, prepares financial reports according to predetermined criteria, records and reports the economic business that has happened, and its fairness is proved by auditing, thus providing true and fair accounting information to the public and making accountants bear financial responsibilities to the public. Accounting activities record the past and present, and at the same time, put forward predictive criteria that affect future economic activities, and protect all kinds of resources to be used economically and effectively, which leads to accounting management responsibility.

Visible, whether from the perspective of financial responsibility and management responsibility, or from the perspective of internal responsibility and external responsibility, accounting responsibility is what accounting should undertake as a management activity. Corresponding to accounting responsibility is accounting right. It is precisely because accounting subjects engaged in accounting work have to bear so many accounting responsibilities to the public that they should have more rights than others to process accounting information according to laws, regulations and professional judgments, so as to make it true and complete and more conducive to management.

To sum up, accounting responsibility refers to the corresponding accounting objectives, and the responsibility that accounting activities should bear is to ensure the realization of accounting objectives. According to the requirements of China's independent auditing standards, the accounting responsibility of the audited entity involves the following three aspects. (1) Establish and improve the internal control system of enterprises. With the gradual increase of enterprise scale and business volume and the complexity of transaction processing, the financial department, as the lifeblood of enterprise economy, may have more mistakes and frauds in accounting procedures. Therefore, the establishment and improvement of enterprise internal control system can ensure the effective operation of enterprises. (2) Ensure the safety and integrity of assets. As long as the two rights are separated, the owner gives the management right to the operator, and the operator should be duty-bound to ensure the safety and integrity of the assets. Therefore, accounting is not only a simple accounting, but also a responsibility to supervise the preservation and appreciation of enterprise assets and prevent the loss of enterprise resources (for state-owned enterprises, that is, state-owned assets). (3) Provide true and fair accounting information to all parties outside the enterprise. Correct economic decision-making requires relevant and reliable accounting information. National macroeconomic decision-making departments, enterprise managers, investors and creditors all need to know the real accounting information of enterprises to make decisions. Enterprise groups should reflect the financial status and operating results of the whole enterprise as a whole, and also require independent accounting departments to provide true, legal and complete accounting information, thus ensuring the needs of the group's overall decision-making.

Second, the theoretical source of audit responsibility

1. The evolution of independent audit behavior

Independent audit is the product of the development of commodity economy to a certain stage, which is closely related to many factors such as social productivity level, political system, legal system, economic development, social culture and so on, among which the change of economic environment is the direct cause of the evolution of audit behavior. Looking at the history of independent audit development, we can see that the evolution of independent audit behavior can be divided into the following four stages:

(1) 172 1 year to the beginning of the 20th century. The emergence and development of joint-stock companies make the operators directly responsible to the owners. The separation of ownership and management directly leads to the emergence of independent audit. During this period, the main goal of audit is to find mistakes and prevent abuses, and to evaluate the completion of entrusted economic responsibility through detailed audit of company accounting subjects. The external subject of audit is mainly shareholders.

② From the early 20th century to the 1930s. The infiltration of financial capital into industrial capital complicates the entrusted responsibility of operators, and the object of responsibility is both shareholders and creditors. Therefore, the goal of audit is to judge the credit status. In the audit method, sampling audit is introduced to audit the balance sheet of enterprises. Its external stakeholders have also developed into shareholders and creditors.

(3) 1930s to 1940s. At present, the heavy economic crisis has caused great losses to the whole society, so we pay more attention to the entrusted responsibility of operators. In the eyes of accountants and auditors, the distortion of accounting information and low audit quality are the important reasons leading to the 1929 economic crisis. Therefore, the goal of audit becomes to express opinions on the credibility of statements. Audit not only the balance sheet, but also the income statement. The audit method has developed into sampling audit based on internal control system. The scope of auditing external parties is wider, including securities trading institutions, financial institutions and potential investors in addition to shareholders and creditors.

(4) From 1930s to present. The trend of economic internationalization has intensified, and the unprecedented development of multinational companies has further complicated the entrusted responsibility of operators. The external stakeholders of audit have developed into the whole society. The goal of audit is to express opinions on the legality, authenticity and fairness of statements. Use various methods to audit all statements, such as system-based audit and electronic data processing audit. International auditing standards have emerged and gradually improved.

2. Audit behavior-> Audit responsibility

Through the analysis of the evolution of independent audit behavior, we can see that the influence of external economic environment on audit behavior depends on the characteristics of entrusted economic responsibility of operators at a certain stage. The development of productivity causes the change of entrusted economic responsibility, which is the fundamental reason to promote the evolution of audit behavior. The goal of audit is to evaluate the entrusted economic responsibility. The purpose of audit is to review and evaluate the performance of the trustee's economic responsibility, so as to determine or remove his entrusted economic responsibility and ensure its effective performance. How to achieve the audit goal is the audit responsibility.

Since the economic development, the object of entrusted economic responsibility has expanded to the whole society, the scope of responsibility has been further expanded, and the intensity of responsibility has been further strengthened. The audit responsibility of certified public accountants lies in the audit report. Specific Standards for Independent Auditing No.7 stipulates: "Certified public accountants shall be responsible for the authenticity and legality of the audit reports issued." The authenticity of the audit report mainly includes the following three aspects: (the audit report should truthfully reflect the audit scope, audit basis, audit procedures and audit opinions of certified public accountants; (Impartial, without any prejudice, all major aspects affecting the fair expression of accounting statements should be disclosed; (r) Verifiability, that is, if verification is needed afterwards, the same audit conclusion can be obtained according to the same audit procedure. The legality of audit reports means that audit reports must comply with the Law of People's Republic of China (PRC) on Certified Public Accountants and Independent Auditing Standards. According to Articles 21 and 39 of the Law on Certified Public Accountants, "certified public accountants ... must issue reports in accordance with the working procedures determined by professional standards and rules." Certified public accountants and accounting firms that do not conduct business in accordance with the requirements of professional standards and rules shall bear corresponding legal responsibilities. Therefore, audit responsibility is the responsibility of certified public accountants to evaluate and verify themselves.

It can be seen that the audit responsibility and the accounting responsibility of the audited entity are different in content and nature, and they cannot be replaced or exempted from each other.

Third, the international comparison of the definitions of accounting responsibility and auditing responsibility.

The existing Chinese and foreign auditing standards do not give an accurate explanation of the definitions of accounting and auditing responsibilities. Different countries have different historical and cultural backgrounds, and there are still differences in audit objectives and audit responsibilities. This paper selects several representative countries for comparative analysis.

The first category: European countries, such as Switzerland, rarely stipulate the responsibility of auditors in discovering major mistakes and frauds. In Switzerland, the goal of auditing is to enable auditors to express their opinions on the compliance of financial statements. The auditor's duty is to agree or disagree with the accounts submitted to the shareholders' meeting. Swiss auditors do not verify the authenticity and fairness of accounts, but verify the legitimacy and compliance of accounts. According to the professional practice of auditing in Switzerland, auditors do not need to systematically look for fraud. Therefore, even if auditors find illegal acts, they do not have to bear the responsibility of whether they have taken due care in the audit. At this point, Switzerland is similar to Germany.

The second category: strictly stipulate the legal responsibility of certified public accountants and the responsibility of discovering fraud. These countries mainly include the United States, Canada, Mexico and Japan, with the United States as the representative. The goal of the audit of financial statements in the United States is to "express opinions on the fairness of financial statements and declare that the financial situation conforms to generally accepted accounting principles". Taking the fairness of financial statements as the audit goal evolved from the early audit goal, that is, finding fraud. Although auditing does not specifically look for fraud, auditors should be responsible for fraud and errors that may lead to significant differences in financial statements. As for the legal responsibility for discovering fraud and mistakes, if auditors cause losses due to negligence, they should be responsible to customers and third parties.

The third category: there are no specific guidelines and legal provisions. Mainly some countries in the Middle East, such as Jordan and Kuwait.

From the above analysis, it can be seen that different countries have different definitions of accounting responsibility and auditing responsibility, and the focus of differences lies in the different identification of whether auditors have found fraud responsibility. On the basis of coordinating the differences among countries, international auditing standards point out: "Certified public accountants should be able to provide reasonable guarantees for discovering fraud and errors that have a significant impact on accounting statements." At the same time, it is also pointed out that "the failure to find major misstatements and frauds in accounting statements does not mean that the audit work has not been carried out in accordance with generally accepted auditing standards, but it has to bear corresponding responsibilities and consequences". It can be seen that as long as the CPA practices in strict accordance with the auditing standards, he should not be responsible for the audit. For the impact of false information in the statements, the audited entity shall bear the accounting responsibility. China's CPA industry started late, and the definition of the two draws more lessons from the opinions of international auditing standards.

Fourth, the analysis of the reasons why the two concepts are difficult to define in practice.

The possible audit responsibilities mainly include: (The auditor's own reasons, such as the CPA's failure to strictly abide by the independent auditing standards and the CPA Law, or the lack of good professional ethics. The three old cases of "Shen Guo Yuan Ye", "Great Wall" and "Hengshui Fraud" and the three new cases of "Qiong Minyuan", "Hong Guang Industry" and "Dongfang Boiler" are all due to the auditors' failure to audit according to the requirements of independent auditing standards. (The audited party's reasons mainly include customer's mistakes, fraud, illegal acts and customer's business failure.

There are still some practical problems in the audit of certified public accountants in China, which leads to the unclear definition of accounting responsibility and audit responsibility. The main reasons are as follows:

(A) lack of independence of certified public accountants

The subject of independent audit is the CPA in a detached and independent position, which is a kind of entrusted audit, not a compulsory audit. Therefore, independent audit should have dual independence, independent of both the client and the audited entity. At present, the problems of "affiliated system" and administrative intervention of accounting firms are still very prominent, and it is difficult for certified public accountants and accounting firms to achieve real independence and break the monopoly of industries and regions. This is a very important factor that leads to the unclear definition of accounting responsibility and audit responsibility in practice.

(B) the differences in understanding of the two concepts

At present, there are differences in our understanding of accounting responsibility and auditing responsibility.

1. Differences in understanding between the accounting profession and the public

The purpose of CPA audit is to reasonably ensure the reliability of the audited entity's accounting statements by auditing the audited entity, so that the users of accounting statements can make reasonable judgments and decisions. However, CPA audit is not a 100% commitment to the correctness, legality and completeness of the audited entity's accounting statements, but a positive guarantee to the future development, economic benefits and efficiency of the audited entity. However, the development of certified public accountants in China is not long, the public has some misunderstandings about the nature of private auditing and the significance of auditing reports, and there are some gaps between the public's auditing expectations and the actual role of auditing, which is another objective reason for the unclear definition of accounting responsibility and auditing responsibility.

In addition, the CPA industry started late in China, and the public's understanding and help for CPA auditing is also largely lacking. For example, in the audit business, it is necessary to obtain audit evidence by means of letters and certificates. The firm sends letters and certificates to all parties related to the audited entity, but it cannot guarantee effective reply. The public's unconsciousness about the profession of certified public accountants has undoubtedly brought some difficulties to the audit work, thus affecting the audit quality.

2. The difference between enterprises and companies

It is difficult to define accounting responsibility and audit responsibility, and one of the reasons for transferring risks to each other is that the undertakers of the two responsibilities have different angles and represent different interest subjects, and there is a conflict of interest between the audited unit and the firm.

The auditee always shirks its accounting responsibility on the grounds that "the auditee should find out the existing problems". However, modern audit has developed from detailed audit to sampling audit, and it is impossible to involve all the vouchers and account books of enterprises in terms of the breadth of audit evidence collection; From the depth of audit evidence collection, the audit work is only to re-identify the authenticity and fairness of enterprise accounting information in a short time. Auditors only infer the cause and process of business from the original documents, and their understanding is very incomplete. If enterprise managers, accountants and related parties collude in fraud, the audit risk will greatly increase. Therefore, it is only possible to bear the audit responsibility caused by audit mistakes.

At present, the quality of accountants in China is generally low, and some firms are engaged in business, such as bookkeeping and preparing statements. This really makes it difficult to define accounting responsibility and auditing responsibility. When certified public accountants engage in agency business, as auditors, but represent the accounting subject, and then the firm audits the statements based on false or even untrue accounting information, their responsibilities will become very vague.

Imperfect law

1. Uncertainty of accounting standards

Accounting standards adopt different accounting methods for many transactions and events. This selectivity and accounting treatment of business beyond the standards are the reasons for unclear accounting and auditing responsibilities. This selectivity makes the company have many alternative accounting methods to prepare accounting reports, while independent auditors lack clear standards when evaluating the choice of accounting methods, which makes the accounting responsibility easily transferred to the audit responsibility, thus causing the legal responsibility of certified public accountants.

2. The object of responsibility is not clear

In China's current standards, there is no clear stipulation on the object of responsibility of auditors, and there is no relevant law clearly stipulating the object of accounting responsibility of enterprise management authorities. Because there is no object of responsibility, the definition of accounting responsibility and audit responsibility may be vague.

3. There is no clear basis for professional judgment

In the process of independent audit, it is often necessary to use the professional judgment of certified public accountants, which is subjective in distinguishing accounting responsibility from audit responsibility. For example, the evaluation of "importance" by certified public accountants, accounting standards and auditing standards have provisions in this regard, but accountants and auditors need to use professional judgment. Because of their different environments and goals, their professional judgments cannot be exactly the same, and the judgment of materiality principle is a very important factor affecting the audit quality. Once the responsibilities of both parties are involved, it is difficult to define whether accountants abuse accounting policies or auditors fail to maintain due professional caution.

For another example, this problem also exists in the audit of company reorganization and listing. At present, most listed companies are reorganized on the basis of the original state-owned enterprises. Before listing, the company's overall restructuring, division restructuring or merger and reorganization need to simulate the accounting statements of the reorganized enterprise for the first three years. Although simulated accounting statements have also been audited by certified public accountants, there are no accounting standards and auditing standards related to statement simulation at present, which makes certified public accountants rely more on their professional judgment in the audit process, and it is difficult to distinguish accounting responsibility, auditing responsibility and asset evaluation responsibility when problems arise.

In addition to the above factors, the responsibilities of both sides are confused with each other, and part of the reason is that both sides make a fuss about some concepts that are easy to be blurred. Such as "error and fraud", "management failure and audit failure", the authenticity and legitimacy of audit and the different meanings of accounting authenticity and legitimacy. The actual operation is subjective and difficult to define strictly.

Practice of defining accounting responsibility and auditing responsibility by verb (abbreviation of verb)

At present, in audit practice, the feasible methods are to sign an audit engagement letter, implement the accounting information commitment system, strengthen the internal accounting supervision of enterprises, strengthen social supervision, establish and improve a good internal control system of enterprises and quality control system of accounting firms, improve the quality of accounting work and audit work, and avoid the occurrence of legal proceedings of certified public accountants as much as possible.

In short, it is not easy to strictly define accounting responsibility and auditing responsibility. We can only improve various systems and systems as much as possible to achieve fairness and justice, promote the development of enterprises and protect the legitimate rights and interests of certified public accountants and firms.

193 1, ultramares Corp. v. Tachi Certified Public Accountants: Ultramares Corp. issued loans to Fred Stern Rubber Import and Export Company according to the balance sheet audited by Tachi Certified Public Accountants, and the latter went bankrupt, resulting in huge losses for the lender. As a result, the boss of the company was furious with the accounting firm, accusing it of failing to find out the fraudulent behavior of the fictitious accounts receivable of the borrowing enterprise, and there was negligence in the audit, requiring it to compensate for the losses. This incident, to a certain extent, reflects the hidden danger caused by the unclear boundary between accounting responsibility and audit responsibility. At the beginning of 1938, Robbins company went bankrupt, which also made great contributions to the definition of accounting responsibility and audit responsibility. The bankruptcy of Robbins Company has caused losses to many shareholders and creditors, especially Thompson Company, which is the largest creditor of the company. Therefore, Thompson will accuse the auditor, accuse PricewaterhouseCoopers of negligence in the audit and demand compensation for all losses. At the hearing held by the New York Securities and Exchange Commission, waterhouse Accounting Company rejected Thompson's allegations and demands, arguing that they conducted the audit according to the rules stipulated in 1936 "Auditing Financial Statements by Independent Public Accountants" issued by American Institute of Accountants, and there was no fault; The bankruptcy of Robbins Company was caused by the collusion of managers, and the auditors were not responsible for it. In the end, the case ended with the accounting company returning the audit fee of $500,000 collected over the years as a kind of "comfort" for Thompson Company to suffer huge losses.