Regulatory authorities have stepped in to reinforce accounting responsibilities— which companies and accounting firms have received penalties this year?

The Ministry of Finance has issued a draft opinion seeking public comments on further reinforcing accounting responsibilities, clarifying that entities must fully assume primary accountability for their accounting work. Specifically, the head of an entity bears responsibility for the authenticity and completeness of the entity’s accounting work and accounting records. So far this year, the China Securities Regulatory Commission (CSRC) has issued at least six administrative penalty decisions involving revenue inflation in annual reports of listed companies (including delisted companies), with the total inflated revenue amounting to RMB 26 billion. The related parties were collectively fined RMB 160 million. Additionally, six auditing firms were penalized. Further reinforcement of accounting responsibility: Ministry of Finance seeks public comments On June 25, 2025, the Ministry of Finance’s official website released a notice soliciting public comments on the ‘Draft Opinion on Further Reinforcing Accounting Responsibilities and Strengthening Implementation of Accounting Laws, Regulations, and Uniform National Accounting Systems’ (hereinafter referred to as the “Opinion”). The Ministry stated that accounting work involves numerous stakeholders; however, in certain industries and sectors, the boundaries of accounting responsibilities remain unclear, awareness of accounting-related rule-of-law principles needs strengthening, and the uniformity, authority, and enforceability of nationally unified accounting systems require improvement. To reinforce accountability across all parties, the Ministry drafted the Opinion. The Opinion explicitly stipulates full implementation of the accounting主体责任 (primary responsibility) of entities. Entities must ensure the authenticity and completeness of their accounting books and must not conduct accounting based on fictitious economic transactions or documents. The term “entities” includes state organs, social organizations, companies, enterprises, public institutions, and other organizations. The Opinion requires clarification of accounting responsibilities for relevant personnel within entities. The head of an entity shall bear responsibility for the authenticity and completeness of the entity’s accounting work and accounting records; the person in charge of accounting work shall properly assist the entity head in managing accounting affairs; and other staff members must provide authentic and complete original vouchers and related materials. The Opinion states that accounting firms and certified public accountants must genuinely fulfill their role as independent auditors, and must not issue audit reports without performing necessary audit procedures or obtaining sufficient and appropriate audit evidence, nor may they conceal problems identified during audits or issue inappropriate audit opinions. In addition, the Opinion sets requirements for agencies providing bookkeeping services and accounting software service providers, emphasizes reinforcing regulatory responsibilities of government departments, leverages industry associations’ self-regulatory and supervisory functions, and calls for strengthened organizational leadership. Since the beginning of 2025, the CSRC has published 67 administrative penalty decisions. Among them, at least six concern revenue inflation in the annual reports of listed companies (including delisted companies), involving five companies: *ST Dongfang (600811.SH), Bekang Delisting (002411.SZ), Pulide Delisting (300630.SZ), Zhuolang Delisting (600225.SH), and Furen Delisting (600781.SH). Additionally, in March 2025, ST Tianrui (300165.SZ) and its responsible parties were penalized for under-recording RMB 610 million in construction service revenue in 2021 due to non-compliance with accounting standards; in February, Chao Hua 1 (400243.NQ) was penalized for inflating profits through fabricated electrolytic copper trading activities and under-recording interest expenses. The total inflated revenue for these five companies amounted to RMB 26 billion, and the related parties were collectively fined RMB 160 million. In April, the CSRC issued an administrative penalty decision against *ST Dongfang and its responsible parties.

What civil, criminal, and administrative remedies are available to minority shareholders when accounting books and accounting vouchers are missing?

We have previously published several articles on how minority shareholders may assert their right to information. This right forms the foundation for minority shareholders to safeguard their other rights. Only by accessing internal corporate documents can shareholders gather evidence needed to protect those other rights—and among such evidence, accounting books and accounting vouchers are the most critical. Yet what recourse do minority shareholders have if, after successfully asserting their right to information in court, controlling shareholders or the company itself undermine the process by claiming—behind the scenes—that the company’s accounting books are extensively missing due to an ‘accident,’ or that no accounting books were ever established? First, the Company Law and its judicial interpretations provide civil remedies enabling shareholders to seek monetary compensation. Maintaining and preserving accounting books is a statutory obligation explicitly imposed by the Accounting Law, and also a legal duty incumbent upon directors and senior management. Whether accounting books were never established in the first place or became lost due to improper custody, directors and senior management bear direct liability. Without accounting books, distributable profits cannot be calculated, thereby severely infringing shareholders’ interests—entitling shareholders to directly file lawsuits before the people’s courts. Relevant legal provisions include: # Article 12 of the Supreme People’s Court’s Provisions on Several Issues Concerning the Application of the Company Law of the People’s Republic of China (IV): “Where directors, senior management, or other personnel of a company fail to perform their duties as required by law, resulting in the company’s failure to prepare or retain corporate documents specified in Articles 33 and 97 of the Company Law, thereby causing losses to shareholders, the shareholders’ claims for civil compensation against such directors or senior management who bear corresponding liability shall be supported by the people’s courts.” # Article 152 of the Company Law: “Where directors or senior management violate laws, administrative regulations, or the company’s articles of association, thereby harming shareholders’ interests, shareholders may institute proceedings before the people’s courts.” Second, the absence of accounting books may well result from intentional human conduct, potentially constituting a criminal offense under the Criminal Law. Those responsible may be prosecuted for the crime of concealing or intentionally destroying accounting vouchers, accounting books, or financial accounting reports. If controlling shareholders or actual controllers instigated such acts behind the scenes, they too may be held criminally liable.

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