Limits and Restructuring of Auditor Civil Liability: An Analysis based on Fault-Liability Proportionality in China

Abstract

To address the problems of excessive liability exposure and overbroad attribution of liability faced by accounting firms under China’s registration-based IPO regime, this article proposes a doctrinal reconstruction of the current civil liability framework for securities audits, grounded in the principle of proportionality between fault and liability. The audit expectation gap and the regulatory–judicial disconnect have distorted the obligation of “reasonable assurance” into a de facto “guarantee of results,” thereby giving rise to a solvency-driven deep pocket effect. This article argues for moving beyond narrow legislative debates and establishing a tiered liability system. First, it proposes clarifying the degrees of fault through an expert assistant mechanism. Second, it calls for a differentiated allocation of liability forms: full joint and several liability for intentional misconduct, proportionate joint and several liability for gross negligence, and supplementary liability for ordinary negligence. Concurrently, a judicial discretion model incorporating factors such as causative potency and the balance of risk and reward should be established to achieve a dynamic equilibrium between investor protection and the development of the auditing industry.