A Brief Analysis Of The Special General Partnership System Of Accounting Firms

Modern accounting firms are much more complex in their organizational structure than they used to be.

This is also a kind of "natural selection" under the circumstances of continuous legal proceedings against accounting firms.

Take the four largest accounting firms in the world as an example, each of them has formed a global network through a series of contracts, but each one is independent of each other in risk taking.

It is said that unless there are four senior partners in the internal field, they will also be responsible for the affairs in this area.

Even though every family is no longer a simple partnership, it is a partnership called "limited liability". In English, it is called "Limited Liabilities Partnership", or "LLP" for short.

It is a form of organization that combines limited liability company with partnership.

In China, due to legal reasons, most of the accounting firms initially adopted the form of limited liability companies, not the form of partnership.

Under such an arrangement, even if the accounting firm is punished, it has to bear a limited liability, so long as the registered capital of the company is lost, it will not hurt the wealth of the partners.

This institutional arrangement seems to make accounting firms more likely to sell their independence and impartiality for profit than partnership.

Because even if you lose your hand, you won't necessarily get hurt or hurt. It may just be "sacrificing me, a happy family". Even the plan of "cicada" has no need to do it. It is even more likely that "seeing success or failure, life is heroic, is just starting over again".

If it is under the partnership system, once the auditor is out of trouble, he will be bankrupt.

It is undeniable that if there is no reasonable institutional arrangement to increase the risk awareness of Chinese certified public accountants, the improvement of audit quality of China's CPA is lack of motivation, which is also the principle of "natural selection and survival of the fittest".

A reasonable one

Without the arrangement, China's independent auditing environment is prone to "Reverse Elimination" of "bad money drives out good currency".

China's regulators have also been discussing the restructuring of accounting firms.

In 2010, the Ministry of finance began to promote large and medium-sized accounting firms to adopt the form of special general partnership.

Compared with general partnership, the special general partnership has realized the moderate separation of partners' legal liability, avoiding the "no fault partner" paying the bill for other partners' illegal activities or gross negligence.

There was once a cartoon trying to explain this change: in the picture, the partners in the general partnership period are trying to pull up one who is about to fall off the cliff.

After turning into a special general partnership, the danger of "sinking a ship with one person" does not exist, and other partners begin to look at the people who are wrong.

Comics to cartoons, this restructuring, to encourage steady expansion of the firm is still of positive significance.

Compared with the limited liability system, the special general partnership pays more attention to quality control and responsibility restriction, which is beneficial to reflect the business characteristics of CPA firms which focus on "human integration" instead of "capital", and adapt to the management mode of large and medium-sized accounting firms, while ordinary partnerships are suitable for small firms.

From 2010 to now, the proportion of limited liability firms has decreased year by year, while the proportion of general partnerships or special general partnership firms has increased significantly.

If you are interested in setting up conditions for special general partnership firms or regulations governing other firms, you may study the Interim Measures for approval and supervision of accounting firms (24 order).

At present, the order No. 24 is the departmental rule of the CPA industry which is second only to the "People's Republic of China registered accountants act".

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