Among the special provisions of the new "Company Law" in 2006 for one-person limited liability companies, Article 63 stipulates the auditing system of financial and accounting reports of one-person companies. A one-person limited liability company shall make financial and accounting reports at the end of each fiscal year and be audited by an accounting firm.
Although this provision is only 38 words, it is an important reason why the new company law dares to add relevant provisions on one-person limited liability companies, and it is a key measure for the company law to supervise and regulate one-person companies. Therefore, it is necessary to make some in-depth analysis of this provision.
(A) the establishment of a statutory audit system
Article 63 of the Company Law clearly uses the word "audit". It should be said that this is a sign that China's company law formally establishes a statutory audit system on the one-person company system. At the same time, Article 165 of the Company Law also makes the same provision: "A company shall make financial and accounting reports at the end of each fiscal year and audit them by an accounting firm according to law." Before the amendment, Article 175 of the Company Law stipulated: "A company shall make financial and accounting reports at the end of each fiscal year, which shall be examined and verified according to law." From the legislative changes of Company Law, the original "audit" has been changed to "audit". From the accounting point of view, this is a very important change, because it formally establishes the mandatory audit in the accounting reporting system of Company Law in China, requiring every company to conduct an audit at the end of the year, whether it is a limited liability company or a joint stock limited company, of course, including a one-person company. Before the revision of the company law, only listed companies, foreign-invested enterprises and some state-owned enterprises implemented the statutory audit system in practice.
Although the provisions of the new "Company Law" on one-man company are unprecedented, in essence, the one-man company stipulated by Chinese law is only a limited liability company. Such a one-man company must of course obey the provisions of Article 165 of the Company Law and implement a statutory audit system. At the same time, from the content of article 63, the financial accounting system implemented by one-man company is consistent with the requirements of all companies in the whole company law, that is, the statutory audit system of one-man company is no different from that of other companies. I think the emergence of Article 63 is more about emphasizing and maintaining the independence of clauses, because under the background of one-man company entering China's company law for the first time, using a clause to clearly emphasize the financial and accounting reporting system of one-man company is more conducive to grasping this new company form in the practice of company law, on the other hand, it also makes the external supervision system of one-man company continuous and targeted in legislation.
(two) the establishment of an accounting firm as the subject of audit
The company law defines the legal subject of annual financial report audit, namely accounting firm, mainly in accordance with international practice and combined with China's actual situation.
When establishing the statutory audit mode of corporate financial reports in China, the first problem to be solved is who will lead the audit, the independent certified public accountant or the government. In fact, in the company legislation of market economy countries, this is not a problem, because the government audit and CPA audit have a clear division of labor and positioning. National audit institutions are mainly concerned with the clean operation of government departments and the efficiency of the use of public funds, while accounting majors audit the company's financial statements in order to serve the needs of shareholders to supervise management and reduce agency costs. In the original company law, the subject of "audit" has always been a question, but this time the new company law clearly defines the subject of statutory audit as "accounting firm", which is also an important symbol for the new company law to get rid of the remnants of the planned economy system and fully adapt to the market economy.
As for the one-man company stipulated in China's company law, it is necessary for the accounting firm to be the statutory audit subject, because under the organizational form of one-man company, there is no effective mechanism to restrict and balance the company, and the simplification of shareholders makes the company completely controlled by one subject. At this time, the internal accounting review of the company often cannot effectively protect the rights and interests of creditors and other stakeholders. In this case, the statutory audit system is chosen as a measure to supervise one-man companies and protect other companies' stakeholders. At this time, the accounting firm, as the main body of accounting report audit, has become the focus of this measure, and it has become an important factor to effectively supervise one-person companies from the outside to achieve a balance of interests.
Accounting firm is the main body of statutory audit, which embodies the independence of external audit. On the one hand, this external audit system replaces the government's supervision of the company, on the other hand, it does not require the government to spend money, thus better protecting the interests of stakeholders.
(III) Evaluation of Article 63 of the Company Law
The characteristics of a one-man company determine that it is easy to have the company's assets and shareholders in the same pot, including two situations: one is that the company's business premises are mixed with the shareholders' residence, or the subsidiary and the parent company's business premises are in the same place, and the company's property is used for personal expenses without proper records or complete company property records; The second is that shareholders engage in the same business activities as the company to transfer the company's assets. As a very important provision for one-man company in the Company Law, Article 63 will play a positive role in the separation of company assets from shareholders' property, and the external statutory audit system established by this provision will effectively prevent and supervise the natural disadvantages of one-man company hotchpot. The auditing system of financial accounting report of one-man company is an important safeguard measure for one-man limited liability company to standardize its operation and improve its governance structure.
At the same time, I believe that in order to give full play to the powerful supervision and guarantee of the external statutory audit system of financial accounting reports of one-person companies, the existing legislative provisions of the company law are still insufficient. As an important aspect of the external supervision and inspection system of one-man company, Article 63 of the Company Law is too monotonous. In practice, of course, it is necessary to follow the relevant provisions of Chapter VIII of the Company Law on corporate finance and accounting. At this time, there will be a phenomenon that the existing company law cannot take care of the special situation of one-man company. For example, the first paragraph of Article 170 of the Company Law stipulates the employment and dismissal methods of accounting firms:
"The appointment and dismissal of an accounting firm that undertakes the company's audit business shall be decided by the shareholders' meeting, shareholders' meeting or the board of directors in accordance with the provisions of the company's articles of association."
Under the corporate form of one-man company, the shareholders' meeting, board of directors and board of supervisors in the traditional corporate theory no longer exist, and the company is completely controlled by the sole shareholder who contributes capital. At this time, it will inevitably affect the fairness of the accounting firm's work, and even the collusion between the shareholders of a one-person company and the accounting firm will occur. Considering the particularity of one-man company, the choice of external audit subject should pay more attention to transparency and independence. Therefore, it is necessary to strengthen the examination and supervision power of relevant competent departments and relevant stakeholders on the decision-making of accounting firms.
The provisions of Article 63 of the Company Law only initially established the external statutory auditing system for the financial and accounting reports of one-person companies. On the one hand, the perfection of this system should follow the provisions of the whole company law on financial accounting, on the other hand, it should actively increase the relevant provisions in line with the situation of one-person companies. Therefore, we look forward to the judicial interpretation of Article 63 of the Company Law.
In a word, the emergence of the provisions on one-man company in the company law is a great progress in China's company legislation, and it is also the need of the development of the real market economy. However, we should also see that China's "Company Law" only opens a hole for one-man companies, and the provisions are still very limited. The further concretization of one-man company system requires the perfection of external supervision mechanism, which of course also requires the comprehensive concretization of financial accounting reporting system.
The provision in Article 36 of the Company Law is definitely not only a simple repetition of Article 165, but also has its own legislative significance. This clause marks the establishment of a statutory audit system for financial accounting reports of one-person companies. At the same time, it appears independently of the general provisions of the Company Law on corporate finance and accounting, leaving room for the concretization of the statutory audit system of one-person company. We expect this clause to be further developed in the Company Law.